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Tender pipeline remains positive

Our view

Engineers India Ltd (ENGR) reported a muted result, with flat YoY revenue growth. Gross margin contracted ~50bps YoY. Due to reversal of certain provisions, EBITDA margin expanded YoY at 8.5%. Order inflows at Rs12.6bn grew on a low base of Rs2.2bn. As on 1QFY24 order book stands at ~Rs81bn (2.5x TTM 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 BORL and private players, petchem complexes by ONGC, investment in oil-to-chemicals plants, IOCL Paradip complex, etc

Looking forward

We believe EIL’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 EIL to report revenue/PAT CAGR of 13%/29% over FY23? FY25. The stock is currently trading at a P/E of 19.3x/15.1x FY24E/25E EPS. With the recent run-up in the stock price, we downgrade the stock to REDUCE with a revised TP of Rs143.

Result Highlights.

? Revenue stood flat at Rs8bn (YSLe Rs8.8bn) with both Turnkey (+2% YoY) and Consultancy segment (-1% YoY) reporting weak revenue performance

? EBITDA margin saw 110bps compression (adjusted for Rs3.1B provision towards PF in base quarter) coming in at 8.5%

? As a result, Adj. PAT (adjusted for Rs 5.56bn received as client settlement in other income) fell 29% YoY to Rs583mn (YSLe Rs986mn)

? Order Inflow grew 7% vs TTM avg led by consultancy business (Rs4.44bn, +41% vs TTM average) while Turnkey projects saw moderate order inflow of Rs8.2bn (- 29% vs TTM average)

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