Engineers India Q2 Results Review - Decent Quarter; Revenue, Profit Guidance Retained: Prabhudas Lilladher

Prabhudas Lilladher Report

We roll forward to Sep-25E and upgrade our rating to ‘Buy’ from 'Accumulate' (factoring in recent correction in stock price) with revised target price of Rs 166 (Rs165 earlier) valuing it at a price-to-earning of 16 times Sep-25E.

Engineers India Ltd. reported flat revenue YoY with Ebitda margin expanding 668 bps YoY to 12.2%, driven by higher gross margin. A liquidated damages settlement in one Turkey project added Rs 449 million and Rs 446 million to Q2 revenue and profit respectively.

The company is increasing efforts in overseas business in order to bring it to a similar level as the domestic business, with a focus on markets such as Algeria, Nigeria, and South America.

Engineers India is also concentrating on growing its new decarbonisation business including green hydrogen, green ammonia, biofuels, etc. The order book and pipeline remain healthy and will drive revenue growth in coming years. Management has retained its guidance of ~10% revenue and profit after tax growth for FY24, along with ~3% margin in Turnkey Projects.

We believe Engineers India’s long-term growth prospects remain intact given-

1. healthy order book,

2. strong project pipeline,

3. diversification into decarbonisation business, and

4. lean balance sheet.

We estimate revenue/profit after tax compound annual growth rate of 13.2%/21.6% over FY23-26E. The stock is currently trading at a PE of 18.8 times/14.1 times/12.5 times FY24/25/26E. Upgrade to ‘Buy’.

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