Engineers India Q1 Results Review - Tender Pipeline Remains Positive: Yes Securities

Yes Securities Report

Our view

Engineers India Ltd. reported a muted result, with flat YoY revenue growth. Gross margin contracted ~50 basis points YoY. Due to reversal of certain provisions, Ebitda margin expanded YoY at 8.5%. Order inflows at Rs 12.6 billion grew on a low base of Rs 2.2 billion.

As on Q1 FY24 order book stands at ~Rs 81 billion (2.5 times trailing twelve months revenue), providing revenue visibility for next few quarters. Going forward, management expects FY24 order inflows to match FY23 levels and revenue growth of ~10%.

Opportunity pipeline consists of refinery expansion by Bharat Oman Refineries Ltd. and private players, petchem complexes by Oil and Natural Gas Ltd., investment in oil-to-chemicals plants, Indian Oil Corporation Ltd. Paradip complex, etc.

Looking forward

We believe Engineers India’s healthy order book, lean balance sheet, strong project pipeline and technical expertise in new-age segments and expanding global footprint augurs well in the long run and expect the company to report revenue/profit after tax compound annual growth rate of 13%/29% over FY23‐ FY25.

The stock is currently trading at a price/earnings of 19.3 times/15.1 times FY24E/25E earnings per share.

With the recent run-up in the stock price, we downgrade the stock to 'Reduce' with a revised target price of Rs 143.

Result Highlights.

• Revenue stood flat at Rs 8 billion (our estimate: Rs 8.8 billion) with both Turnkey (+2% YoY) and consultancy segment (-1% YoY) reporting weak revenue performance.

• Ebitda margin saw 110 bps compression (adjusted for Rs 3.1 billion provision towards PF in base quarter) coming in at 8.5%.

• As a result, adjusted profit after tax (adjusted for Rs 5.56 billion received as client settlement in other income) fell 29% YoY to Rs 583 million (our estimate: Rs 986 million).

• Order Inflow grew 7% versus trailing twelve months average led by consultancy business (Rs 4.44 billion, +41% versus trailing twelve months average) while Turnkey projects saw moderate order inflow of Rs 8.2 billion (- 29% versus trailing twelve months average)

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