ISGEC Heavy Engineering Q4 Review - Good Visibility On Revenue Amid Margin Improvement: ICICI Securities

ICICI Securities Report

ISGEC Heavy Engineering Ltd.’s Q4 FY23 standalone revenue increased 4% YoY to Rs 14 billion aided by engineering, procurement and construction revenue growth of 8% YoY whereas manufacturing segment revenue declined 4% YoY.

Improvement in the share of high-margin manufacturing business led to marginal improvement in Ebitda margin by 247 basis points YoY to 7.4%. We expect margins to see gradual improvement in the coming quarters with reduction in share of old and low-margin orders.

ISGEC's orderbook grew to Rs 83.2 billion led by order intake growth of 72% to Rs 24.8 billion. Management indicated enquiry pipeline remains robust in both domestic and international product-segments.

Key sectors which are witnessing traction are oil and gas, power (boilers), automobile, specialty chemical, steel and ethanol. Execution of biofuel plant in Cavite, Philippines, is on track and is expected to be operational by August 2023.

We revise our estimates for FY24E and FY25E factoring-in the better order outlook and improving margins.

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