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OTHER HIGHLIGHTS:

For Q4FY21 and FY21:

* During FY21, EIL achieved a turnover of INR 3,104.7 Cr, which was down by ~3% as compared to turnover of INR 3,203.1 Cr in FY20. Segmental breakup for FY21 is as follows; Consultancy, INR 1,383 Cr (Domestic: Rs.1,039 Cr & Overseas: Rs. 344 Cr) down by ~11% on a YoY basis. Turnkey turnover is INR 1,721 Cr showing a growth of ~5%.

* The operating profit for FY21 stands at INR 337 Cr, compared to INR 443 Cr of previous period. The operating profit of FY20 includes an amount of Rs. 84 Cr wrt. variation order received during Q1FY20 for Consultancy projects. Additionally, one time impairment expense to the tune of Rs. 26 Cr is also included in FY20 in other expenses on account of impairment of exploration expenditure relating to the oil & gas exploration blocks.

* In Consultancy sector, EIL achieved profit margin of ~28%, down by 441 Bps compared to the margins in FY20. Additionally in Q4FY21, the consultancy margins were ~39% which were up by ~1324 Bps and 444 Bps on a QoQ basis and YoY basis respectively. Operating margins in the Turnkey business improved substantially in Q4FY21 to 5.6% showing a growth of 426 Bps and 274 Bps on a QoQ and YoY basis respectively.

* The revenue mix in Q4FY21 has shifted substantially towards the turnkey segment where the segmental breakup is Consultancy 36% and Turnkey: 64%.

* EIL also announced that the manufacturing plant of Ramaghundam Fertilizers & Chemicals ltd (RFCL) commissioned by Feb-21.

The details of the company are as follows:

* Total Equity: Rs. 1,700 Cr, Debt: Rs. 4,300 Cr & WC Financing: Rs. 1,650 Cr

* Production Capacity: 1,527 Million Tonne Per Annum

* Expected EBITDA: 29% -32%

* One of the issues with Urea business is that the subsidy given by the government is often delayed. However, the management has taken this factor into consideration while disclosing the expected EBITDA margins.

* Primary focus of the company is to reduce debt on an annual basis and also provide dividends to the shareholders. They are considering for an IPO at a later stage.

* Shareholding of RFCL: Engineers India Ltd: 26% upon an investment of Rs. 447 Cr, National Ferilizers Ltd: 26%, GAIL: 14.3%, Haldor Topsoe, Denmark: 11.7%, Fertilizer Corp of India: 11% and Government of Telangana: 1%.

* The company secured orders worth Rs. 1,569 Cr in FY21 out of which, Consultancy (Domestic): Rs. 1455 Cr, Consultancy (Overseas): Rs. 101 Cr and Turnkey: Rs. 13 Cr.

* Total Cumulative order book as on March 21: Rs. 7,981 Cr. Consultancy: 57% and Turnkey: 43%

OUTLOOK AND VALUATION

We have revised our estimates looking at the recovery in the business operations, industry growth, new projects undertaken, business secured and the order book position of the company. Hence, we have revised estimates upwards and FY23, where the revenue for FY23E is expected to be Rs. 3,825 Cr with a PAT of Rs. 514 Cr and EPS of Rs. 9.01. We have assigned an EV/EBITDA multiple of ~12X and have arrived at a target price of ~Rs.134 within an investment horizon of 12 to 18 months. The target price gives an upside of ~60% with a BUY rating.

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