Buy Engineers India Ltd For Target Rs.271 by Prabhudas Liladhar Capital Ltd
Mixed quarter; Order prospects remain healthy
We revised our FY27E/FY28E EPS estimates by -6.3%/-3.4%, factoring in a cautious outlook on Middle East operations amid ongoing geopolitical disruptions. Engineers India (EIL) reported a mixed quarterly performance with revenue declining ~8% YoY (against higher base), while EBITDA margin contracted 523bps YoY to 16.4% (against higher base). The order book remains healthy at ~Rs151bn with ~72% contribution from the consultancy segment, providing healthy multi-year revenue visibility. Management guided for FY27 order inflow of ~Rs80bn and consultancy revenue growth of ~15-20%, supported by execution ramp-up in recently secured domestic and overseas consultancy projects. Management also highlighted a temporary slowdown in Middle East hydrocarbon project awards amid geopolitical tensions, with delays in greenfield project finalization and slower decision-making likely to impact large-ticket order inflows. EIL, however, continues to strengthen its Middle East presence through longterm agreements with Saudi Aramco, which are expected to support recurring consultancy opportunities. Domestic consultancy opportunities remain healthy across refinery expansions, coal gasification, CBG, biofuel and infrastructure projects, while overseas growth is expected to be driven by Africa supported by large Dangote refinery and fertilizer consultancy contracts. Infrastructure and energy-transition segments are also gaining traction with increasing opportunities in data centers, institutional infrastructure and coal gasification projects, aiding diversification beyond the traditional hydrocarbon business.
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
4) lean balance sheet. The stock is currently trading at a PE of 18.2x/15.0x on FY27/28E. We roll forward to Mar’28E and maintain our ‘Buy’ rating valuing the Consultancy/Turnkey segments at a PE of 22x/10x Mar’28E (22x/10x Sep’27E earlier) arriving at a SoTP-derived TP of Rs271 (Rs261 earlier).
Lower execution impacted profitability:
Consol. revenue decreased by 8.3% YoY to Rs9.3bn (PLe: Rs11.4bn) due to decline in Turnkey revenue (-8.7% YoY to Rs4.1bn) and Consultancy revenue (-8% YoY to Rs5.2bn). Gross margin contracted by 266bps YoY to 55.4% likely due to lower margin order execution in consultancy. EBITDA decreased 30.5% YoY to Rs1.5bn (PLe: Rs2.2bn) while EBITDA margin contracted by 523bps YoY to 16.4% due to lower gross margin and higher other expenses (+8.3% YoY to Rs1bn). PBT decline by 37.7% YoY to Rs2.0bn (Ple: Rs2.5bn) regardless of increase in other income (+72.3% YoY to Rs626mn). Adj. PAT (ex. JVs/associates) decreased by ~13% YoY to Rs1.6bn (PLe: Rs1.9bn) due to weaker operating performance partly offset by lower effective tax rate of 22.9% (-284bps YoY). Profit from JVs/Associates stood at Rs387mn in Q4FY26 (vs profit of Rs375mn in Q4FY25). Adj.PAT declined by -10.5% YoY to Rs2bn (Ple: Rs2.6bn).
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SEBI Registration No. INH000000271
