Buy Engineers India Ltd For Target Rs.271 by Prabhudas Liladhar Capital Ltd
Order momentum remains intact with healthy prospects
We interacted with the management of Engineers India (EIL), where they reiterated FY27 order inflow guidance of ~Rs80bn despite an uncertain global backdrop and maintained a conservative growth outlook. Management highlighted that the current order book stands at ~Rs150bn, with consultancy accounting for over Rs100bn, providing strong medium-term revenue visibility. While activity in the Middle East slowed during the recent conflict, projects largely remained on track and management expects enquiry conversion and execution to accelerate as conditions normalize post US-Iran agreement signed. EIL also recently signed a long-term (5+3 year ) engineering services agreement with Saudi Aramco, which is expected to open up sizeable opportunities over time, although initial orders are likely to be smaller and ramp up gradually based on execution performance. The company continues to pursue opportunities across Africa, including fertilizer and hydrocarbon projects, while domestically it remains optimistic on refineries, petrochemicals, coal gasification, infrastructure and fertilizer investments. Management expects consultancy EBITDA margins to sustain at 22–24%, turnkey margins at 5–7%, and blended EBITDA margins (inc other income) at 17–18%, supported by digitalisation initiatives and a flexible manpower strategy. Infrastructure currently contributes around 20% of the order book and ~25% of annual order inflows, reflecting continued diversification beyond hydrocarbons. Despite maintaining a cautious revenue growth outlook of around 12– 13% due to geopolitical risks , management remains confident that its healthy order pipeline, expanding overseas footprint and diversified business mix position the company well for sustained medium-term growth.
We believe EIL’s long-term growth prospects remain intact given
1) Strong order book prospects in non-oil & gas and oil & gas projects
2) Strong traction in overseas consultancy business from Middle East & Africa region
3) Opportunities in energy transition & infrastructure, and 4) lean balance sheet. The stock is currently trading at a PE of 19.6x/16.1x on FY27/28E. We maintain our ‘Buy’ rating valuing the Consultancy/Turnkey segments at a PE of 22x/10x Mar’28E (same as earlier) arriving at a SoTP-derived TP of Rs271 (same as earlier).
Management maintains growth and margin guidance
* Management maintained order inflow guidance of ~Rs80bn for FY27 despite geopolitical uncertainties.
* Management remained conservative given the geopolitical uncertainties and guided for a revenue growth of ~12–13% for FY27.
* Consultancy margins are expected to remain at ~22–24%, while turnkey margins are guided at ~5–7%, supporting blended EBITDA margins (inc. other income) of ~17–18%, and management expects margins to scale up to ~19% once revenues cross ~Rs50bn
* Management expects the revenue mix to gradually move towards 50:50 between consultancy and turnkey projects, although recent order inflows have been skewed towards consultancy due to the Dangote project.
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SEBI Registration No. INH000000271
