Buy Engineers India Ltd for the Target Rs 328 by Prabhudas Liladhar Ltd
Strong Q2; Consultancy mix underpins margin resilience
Engineers India (EIL) reported a strong operating performance supported by robust order inflows (+196% YoY inc. Dangote order of INR44bn) and a favourable consultancy mix (~75%). YTD order intake stood at ~INR81bn, surpassing the annual guidance of INR80bn, while the order book stood at ~INR204bn, with ~75% contribution from consultancy and ~55% from overseas projects. Management expects FY27 revenue of INR42-43bn, followed by ~10% growth in FY28. Consultancy margins stood at ~30% in Q2FY27 (27.7% in H1FY27), with management guiding for ~25% for FY27 and potential upside from overseas projects, including the INR44bn Dangote project, where engineering work is underway. LSTK execution is expected to improve in H2FY27, with its contribution targeted at 40% of full-year execution vs 32% in H1. The lower-margin depository business (~7% margin) is expected to peak in FY27 and taper from H1FY28, supporting a favourable margin mix thereafter. Nuclear opportunities across engineering consultancy, balance-of-plant and construction supervision are at an early stage, with meaningful order inflows expected from FY28 onwards. While Middle East order prospects remain subdued amid geopolitical uncertainty, diversification into infrastructure (~25% of order inflows), fertilisers and strategic storage, along with improving traction in Africa, provides additional growth opportunities. The stock is currently trading at a PE of 16.3x/13.8x on FY28E/29E. We roll forward to Sep’28E and maintain our ‘Buy’ rating valuing the Consultancy/Turnkey segments at a PE of 24x/10x Sep’28E (24x/10x Mar’28E earlier) with a revised SoTP-derived TP of INR328 (INR297 earlier).
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) sizeable potential in overseas consultancy business from Middle East & Africa region
3) opportunities beyond hydrocarbon in infrastructure, nuclear, coal gasification and energy transition
4) lean balance sheet.
Consultancy revenue mix supports profitability:
Consol. revenue decreased by ~11% YoY to INR8.2bn (PLe: INR10.4bn) against higher base due to decline in Turnkey revenue (-57.5% YoY to Rs2bn) while Consultancy revenue increased by 42.6% YoY to INR6.2bn. Gross margin expanded by 1991bps YoY to 67.8%, likely due to higher margin order execution in consultancy. Consultancy/Turnkey mix stood at 75%/25% (vs 47%/53% in Q2FY26). EBITDA increased 104.4% YoY to INR1.7bn (PLe: INR1.5bn) while EBITDA margin expanded by 1179bps YoY to 21% (Ple: 9.9%) on account of higher gross margin. Consultancy EBIT margin expanded by 1085bps to 31.6% (vs 20.7% in Q2FY26) and Turnkey EBIT margin contracted by 65bps YoY to 4.3%. PBT increased by 105.8% YoY to INR2.3bn (Ple: INR1.8bn) aided by increase in other income (+78.3% YoY to INR658mn). Adj. PAT (ex. JVs/associates) increased by ~112.3% YoY to INR1.8bn (PLe: INR1.3bn) led by better operating performance and lower effective tax rate (-237bps YoY to 22.9%) Profit from JVs/Associates stood at INR209mn in Q2FY27 (vs loss of INR256mn in Q2FY26). Adj.PAT increased by 243.8% YoY to INR2.0bn (Ple:INR1.6bn).
Order book stands at INR204.2bn (5.7x TTM revenue): Q2FY27 order inflow came in at INR69.1bn (+196.1% YoY) includes Dangote order of ~INR44bn. Order book stands at INR204.2bn (5.7x TTM revenue), with Consultancy Domestic/Consultancy Overseas/Turnkey mix of 19%/56%/25%.
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SEBI Registration number is INH000000933
