Buy Engineers India Ltd for the Target Rs. 245 By Prabhudas Liladhar Capital Ltd
Strong rebound in Q1; order prospects intact
Quick Pointers:
* EIL has reaffirmed FY26 guidance of ~20% revenue growth with Consultancy/LSTK EBIT margins of ~22%/6% in FY26
* Q1FY26 order intake was Rs14.3bn with domestic consultancy/overseas consultancy/turnkey mix of 9%/33%/57%. YTD order intake stood at ~Rs27bn.
We cut our FY26/27E EPS estimates by -4.4%/-1.4%, factoring in temporary disruption from the Ramagundam Fertilizer shutdown. Engineers India (EIL) reported a strong quarter with 39.5% YoY growth in revenue and EBITDA margin remaining flattish YoY to 8.3% due to unfavorable revenue mix. Management reiterating FY26 revenue growth of ~20%, driven by its highmargin Consultancy business (~22% margins) and steady LSTK execution (~6% margins). Temporary Q1 drag from the Ramagundam Fertilizer maintenance shutdown has been resolved, with operations normalized at ~90% utilization and full-year profitability intact. Diversification momentum remains strong with non-O&G verticals scaling to 30–35% of the book and guided to 40–45% in future inflows, driven by key infra projects from data center and institutional infra etc. International consultancy traction is accelerating, with Rs9.6bn YTD intake and a visible Petrochem pipeline across Abu Dhabi, Saudi, UAE, and Kuwait. EIL’s maiden ~Rs300mn MoU with NPCIL for the BSMR project marks a strategic entry into nuclear engineering, strengthening credentials and unlocking long-term opportunities in India’s energy transition. The stock is trading at a P/E of 18.7x/15.2x on FY26/27E core EPS. We upgrade our rating from ‘Accumulate’ to ‘Buy’ given recent sharp correction in stock price and value the Consultancy/Turnkey segments at a PE of 22x/10x Mar’27E (same as earlier) arriving at a revised SoTP-derived TP of Rs245 (Rs250 earlier).
Long term view: 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 Middel East, Africa region 3) opportunities in energy transition & infrastructure, and 4) lean balance sheet.
Strong turnkey revenue growth (+70.0% YoY to Rs4.5bn) boosted top line: Consol. revenue increased by 39.5% YoY to Rs8.7bn (PLe: Rs8.4bn) driven by increase in Turnkey revenue (+70.0% YoY to Rs4.5bn) and Consultancy revenue (+17.1% YoY to Rs4.2bn). Gross margin contracted by 924bps YoY to 48.8% due to unfavorable mix of Turnkey business. EBITDA grew 41.3% YoY to Rs721mn (PLe: Rs925mn) with margin remained flattish at 8.3% (PLe: 11.0%) due to lower gross margin partially offset by lower employee costs (-1,000 bps YoY as % of sales). PAT (ex. JVs/associates) increased by 23.5% YoY to Rs728mn (PLe: Rs900mn). PAT (inc. JVs/associates) declined by 28.6% YoY to Rs654mn due to a loss of Rs74mn from JVs/associates (vs profit of Rs327mn in Q1FY25).
Healthy order book stands at Rs121.4bn: Q1FY26 order inflow came in at Rs14.3bn vs Rs23.8bn in Q1FY25. Order book at the end of Q1FY26 stood at Rs121.4bn (3.6x TTM revenue), with Consultancy Domestic/Consultancy Overseas/Turnkey mix of 45%/11%/44%.
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