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  • Stock recommendation: Engineers India Ltd – BUY – TP Rs.187

    Publish date: August 13, 2018

    Result Update

    EIL Q1FY19 result slightly missed our estimates on poor execution in PMC division. Order inflows remain tepid in the quarter; current order backlog reported at Rs 72.3 billion imply four year of revenue visibility.

    Key Highlights

    • Revenue grew 52.7% y/y, reported at Rs 5.7 Bn in Q1FY19 driven by the LSTK (Lumpsum turnkey projects) division. This led to a sharp contraction in EIL reported EBITDA margin to 15.1% vis-a-vis 21.8% in Q1FY18.
    • In Q1FY19, PMC division reported sales at Rs 3.2 Bn (flat y/y). EBIT margin for the segment contracted to 27.9% vis-a-vis 28% (consistent with management guidance) in Q1FY18. LSTP division revenues grew substantially to Rs 2.5 Bn in Q1FY19 vis-a-vis Rs 509 mn in Q1FY18.

    Valuation & Outlook

    • We reiterate our long-term positive view on EIL; our investment thesis is predicated upon

      1) increased awarding of large ticket domestic hydrocarbon PMC orders

      2) sustainability in company's margin profile driven by a higher proportion of PMC orders in FY20.

    • We maintain our earnings estimate and maintain 'BUY' rating on EIL's stock with an unchanged target price of Rs 187. Delays in the awarding of key orders can pose threat to our earnings estimate.


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