Hold Engineers India; target of Rs 135: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on Engineers India

Engineers India (EIL) reported a weak operational performance in Q1FY19 due to the changing execution mix i.e. higher turnkey execution and lower consultancy execution. On a YoY basis, turnkey revenues increased ~4x to Rs 251 crore while consultancy revenue declined 4.4% YoY to Rs 322.3 crore Thus, overall revenues grew 52.7% YoY to Rs 573.3 crore. Consultancy and turnkey segments contributed 56.2% and 43.8% to the topline, respectively EIL reported EBITDA margins of 15.1% (vs. our estimate of 20%) due to higher execution in low margin turnkey segment. Consultancy segment reported EBIT margins of 27.9%. Turnkey segment reported EBIT margins of 5.9% for the quarter. Other expenses witnessed a sharp jump of 202% YoY, mostly due to higher subcontracting and construction material expenses. Accordingly, absolute EBITDA grew 5.6% YoY to Rs 86.4 crore EIL reported PAT growth of 6.5% YoY at Rs 86.6 crore.

Outlook

Despite a healthy dividend payout (~67%) and buyback (6.23% of total equity), EIL’s balance sheet continues to remain healthy with nil debt and cash balance of Rs 2480 crore. With a strong order backlog of Rs 7229 crore (~3.5x book-to-bill), we expect healthy execution in FY19E-20E. We highlight that FY19E and FY20E will witness higher executions from the turnkey segment (order book mix: consultancy 53%, turnkey 47%), leading to overall decline in margins. EIL is also likely to face project-related risks in this segment of the business. Accordingly, we now expect EIL to deliver revenue, EBITDA and PAT CAGR of 18.8%, 4.9% and 5.4%, respectively, in FY18-20E. We value EIL at 20x P/E on FY20E EPS of Rs 6.6 to arrive at a target price of Rs 135 per share. We have a HOLD recommendation on the stock.

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