Engineers India (ENGR IN)

Rating: ACCUMULATE | CMP: Rs155 | TP: Rs165

August 9, 2023 Healthy tender pipeline

Q1FY24 Result Update Quick Pointers:

 Change in Estimates | ☑ Target |  Reco  Other income was higher (up 240% YoY to Rs926mn), due to interest income
(Rs560mn) for settlement amount from one of the client.
Change in Estimates
Current
FY24E FY25E
Previous
FY24E FY25E
 Order inflow in Q1FY24 came in at Rs12.7bn (vs Rs2.3bn in Q1FY23), driven
Rating ACCUMULATE ACCUMULATE by Turnkey segment.
Target Price 165 116
Sales (Rs. m) 37,512 42,444 37,512 42,444
Engineers India Ltd (EIL) reported mix quarterly performance with revenue
% Chng. - -
EBITDA (Rs. m) 4,146 5,572 4,146 5,572 been flat YoY and EBITDA margins expansion of 276bps YoY to 8.5%. Order
% Chng. - -
EPS (Rs.) 7.5 9.7 7.5 9.7
pipeline remain healthy from projects such as BORL- Refinery expansion,
% Chng. - - Private sector – Crude to Chemicals, Polymer projects etc. IOCL-
Petrochemical facility in Gujarat. EIL has been focusing on new age verticals
Key Financials - Consolidated (revenue stood at ~Rs630mn in FY23) like Hydrogen, Biofuel, Biomass etc.
Y/e Mar FY22 FY23 FY24E FY25E EIL is focusing on increasing its presence in exports markets such as Middle
Sales (Rs. m) 29,128 33,301 37,512 42,444
East, Nigeria, Algeria and few countries in Africa. Management guided for
EBITDA (Rs. m) 3,441 3,084 4,146 5,572
Margin (%) 11.8 9.3 11.1 13.1 revenue growth of ~10% with consultancy margins in range of ~25-27% for
PAT (Rs. m) 1,395 3,463 4,232 5,453 FY24. Order inflows to be ~Rs45bn for FY24.
EPS (Rs.) 2.5 6.2 7.5 9.7
Gr. (%) (61.5) 148.2 22.2 28.9
DPS (Rs.) 3.0 3.0 3.4 4.4 EIL’s long term growth prospects remain intact given 1) healthy order book,
Yield (%) 1.9 1.9 2.2 2.8 2) strong project pipeline (mainly from Petrochem orders), 3) diversification
RoE (%) 7.9 18.6 20.4 23.3
into newer verticals like hydrogen and 4) lean balance sheet. The stock is
RoCE (%) 18.2 15.1 18.4 22.2
EV/Sales (x) 2.5 2.2 2.0 1.7 currently trading at PE of 20.5x/15.9x FY24/25E. We maintain Accumulate
EV/EBITDA (x) 21.0 24.2 17.7 12.9 rating on stock with revised TP of Rs165 (Rs116 earlier), valuing it at PE of
PE (x) 62.3 25.1 20.5 15.9
P/BV (x) 4.9 4.4 4.0 3.5
17x FY25E (12x earlier) factoring in healthy order pipeline from petrochemical
segment and focus on diversification into newer verticals (Hydrogen, Biofuel,
coal gasification etc).
Key Data ENGI.BO | ENGR IN
52-W High / Low Rs.161 / Rs.62
Sensex / Nifty 65,847 / 19,571 Lower other expenses drive EBITDA margin: Standalone sales came in at
Market Cap Rs.87bn/ $ 1,049m
Shares Outstanding 562m Rs8.1bn, flat YoY (PLe ~Rs9.4). Turnkey, revenue grew 1.8% YoY to Rs4.6bn,
3M Avg. Daily Value Rs.1105.68m while consultancy segment declined 1.4% YoY to Rs3.5bn. Consultancy accounted
for 42.8% of total sales (43.6% in Q1FY23) and Turnkey projects contributed for
Shareholding Pattern (%) 57.2% (56.4% in Q1FY23). Gross margin declined to 44% in Q1FY24 vs 44.5% in
Promoter’s 51.32 Q1FY23 factoring in business mix. EBITDA grew 48.9% YoY to Rs685mn (PLe
Foreign 7.70
Domestic Institution 18.46 ~Rs809mn), with EBITDA margin expanding 276bps YoY to 8.5% (PLe 8.6%),
Public & Others 22.52
driven by lower other expenses (down 36.9% YoY to Rs556mn- due to provisions
Promoter Pledge (Rs bn) -
write back). Segment wise EBIT margins: Consultancy EBIT margin expanded to
25.6% in Q1FY24 vs 17.2% in Q1FY23, while Turnkey margin remained flat at 2%.
Stock Performance (%)
Adj. PAT grew 125% YoY to Rs1.1bn, (PLe Rs842mn) driven by higher other
1M 6M 12M
Absolute 27.0 85.9 132.8 income (up 240% YoY to Rs926mn).
Relative 25.9 71.3 108.1

Order book stands healthy at Rs81bn: Order inflow in Q1FY24 came in at

Amit Anwani
Rs12.7bn (vs Rs2.3bn in Q1FY23), driven by order win in Turnkey segment
[email protected] | 91-22-66322250
(Rs8.2bn). Order book stands healthy at Rs81bn (2.5x TTM revenue), comprising
Nilesh Soni
[email protected] | 91-22-66322214 of Consultancy (~61%) and Turnkey (~39%). Major order won in Turnkey segment
includes Upgrading of The Institute of Petroleum Safety, Health and Environment
Management (IPSHEM) facility at Goa (Rs3.3bn).

August 9, 2023 1
 Engineers India

Standalone- Lower other expenses and higher other income boost PAT
YoY gr. QoQ gr. YoY gr.
Y/e March (Rs mn) Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY23 FY23 FY22
(%) (%) (%)
Revenue 8,050 7,820 8,306 8,661 8,083 0.4 (6.7) 32,838 28,704 14.4
Total Revenues 8,050 7,820 8,306 8,661 8,083 0.4 (6.7) 32,838 28,704 14.4
Expenditure 7,589 7,400 7,841 7,819 7,398 (2.5) (5.4) 29,862 25,352 17.8
as % of sales 94.3 94.6 94.4 90.3 91.5 90.9 88.3
Consumption of RM 4,469 4,296 4,700 4,814 4,526 1.3 (6.0) 18,279 13,708 33.4
as % of sales 55.5 54.9 56.6 55.6 56.0 55.7 47.8
Employee Cost 2,239 2,393 2,360 2,370 2,316 3.5 (2.2) 9,362 9,049 3.5
as % of sales 27.8 30.6 28.4 27.4 28.7 28.5 31.5
Other expenditure 882 711 781 635 556 (36.9) (12.5) 2,221 2,596 (14.4)
as % of sales 11.0 9.1 9.4 7.3 6.9 6.8 9.0
EBITDA 460 420 465 843 685 48.9 (18.7) 2,976 3,352 (11.2)
Depreciation 51 66 66 70 74 45.6 6.6 252 232 8.7
EBIT 409 354 399 773 611 49.3 (20.9) 2,724 3,120 (12.7)
Other Income 272 669 257 493 926 240.0 88.0 1,691 1,367 23.7
Interest 1 5 4 4 11 726.1 173.4 14 8 69.9
Extra ordinary items - - - - - - -
PBT 680 1,018 652 1,261 1,526 124.3 21.0 4,400 4,478 (1.7)
Total Tax 175 167 175 462 390 122.3 (15.7) 979 1,034 (5.4)
Reported PAT 505 851 478 799 1,136 125.0 42.1 3,421 3,444 (0.7)
(Profit)/loss from JV's/Ass/MI - - - - - - - - - -
PAT after MI 505 851 478 799 1,136 125.0 42.1 3,421 3,444 (0.7)
Adjusted PAT 505 851 478 799 1,136 125.0 42.1 3,421 3,444 (0.7)
Adjusted EPS (diluted) 0.9 1.5 0.9 1.4 2.0 125.0 42.1 6.1 6.1 (0.7)

Margins (%) Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY23 bps bps FY23 FY22 bps
EBIDTA 5.7 5.4 5.6 9.7 8.5 276 (125) 9.1 11.7 (261)
EBIT 5.1 4.5 4.8 8.9 7.6 247 (136) 8.3 10.9 (257)
EBT 8.5 13.0 7.9 14.6 18.9 1,042 431 13.4 15.6 (220)
PAT 12.5 21.8 11.5 18.5 28.1 1,556 965 20.8 24.0 (316)
Effective Tax rate 25.8 16.4 26.8 36.6 25.5 (23) (1,109) 22.2 23.1 (85)
Source: Company, PL

Standalone- Turnkey revenue grew 1.8% YoY

YoY gr. QoQ gr. YoY gr.
Segmental Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY23 FY23 FY22
(%) (%) (%)
Revenue
Consultancy 3,506 3,456 3,503 3,715 3,457 (1.4) (6.9) 14,179 14,999 (5.5)
Turnkey Projects 4,544 4,364 4,804 4,947 4,627 1.8 (6.5) 18,658 14,129 32.1

Segmental EBIT
Consultancy 605 670 690 1,866 885 46.4 (52.6) 3,831 4,085 (6.2)
EBIT margin (%) 17.2 19.4 19.7 50.2 25.6 27.0 27.2
Turnkey Projects 92 136 91 202 95 3.2 (53.3) 521 357 46.1
EBIT margin (%) 2.0 3.1 1.9 4.1 2.0 2.8 2.5
Source: Company, PL

August 9, 2023 2
 Engineers India

Conference Call Highlights

 Tender pipeline remain healthy from projects such as BORL- Refinery
expansion, Private sector – Crude to Chemicals, Polymer projects etc. IOCL-
Petrochemical facility in Gujarat.

 New Age Areas: EIL has been focusing on new age verticals Hydrogen
(initially stats with consultancy projects), Biofuel (executing one bamboo based
refinery project), Coal Gasification, Defence, Airports etc. Revenue from new
age areas stood at ~Rs630mn in FY23.

 Exports: Focus is on expanding overseas presence. Recently got order from

Nigeria in Petrochem and targeting more orders there. Middle east got few
projects and now focusing on increasing reach over there. Apart from this
targeting new geographies like Algeria and Africa.

 Technology Tie-ups: EIL entered into technology tie up with Sunrise CSP
group – Australia for to expand its capabilities in Solar Projects. Sunrise will
provide its technology, while EIL will provides its EPC services.

 Other income was higher during the quarter due to interest income (Rs560mn)
from settlement with one of the client in consultancy segment.

 Other expenses were lower due to provisions write back.

 Ramagundam Fertilizer Project (RFCL)- Profit for EIL stood at Rs225mn vs

Rs139mn in Q1FY23.

 Order inflows came in at Rs12.7bn comprising of Turnkey (~65%) and

Consultancy (~35%). Some orders are in advanced stage of awarding and will
be announced post receiving orders.

 Appointed as consultant for one of roof top solar project.

 Consultancy fees accounts for 2-3% of total project cost.

 Off the total order book of ~Rs810bn, exports accounts for ~Rs16bn.

 Guidance: Revenue to grow by~10% with consultancy margins in range of 25-

27% for FY24.

August 9, 2023 3
 Engineers India

Financials
Income Statement (Rs m) Balance Sheet Abstract (Rs m)
Y/e Mar FY22 FY23 FY24E FY25E Y/e Mar FY22 FY23 FY24E FY25E

Net Revenues 29,128 33,301 37,512 42,444 Non-Current Assets

YoY gr. (%) (7.4) 14.3 12.6 13.1
Cost of Goods Sold 13,768 18,360 19,131 20,755 Gross Block 3,490 3,914 4,414 4,914
Gross Profit 15,360 14,941 18,381 21,689 Tangibles 3,490 3,914 4,414 4,914
Margin (%) 52.7 44.9 49.0 51.1 Intangibles - - - -
Employee Cost 9,237 9,535 10,202 11,427
Other Expenses 999 424 1,500 1,698 Acc: Dep / Amortization 1,195 1,452 1,742 2,065
Tangibles 1,195 1,452 1,742 2,065
EBITDA 3,441 3,084 4,146 5,572 Intangibles - - - -
YoY gr. (%) (1.6) (10.4) 34.4 34.4
Margin (%) 11.8 9.3 11.1 13.1 Net fixed assets 2,295 2,462 2,672 2,849
Tangibles 2,295 2,462 2,672 2,849
Depreciation and Amortization 236 257 290 323 Intangibles - - - -

EBIT 3,205 2,827 3,856 5,250 Capital Work In Progress 85 282 282 282
Margin (%) 11.0 8.5 10.3 12.4 Goodwill - - - -
Non-Current Investments 10,970 11,688 11,461 11,527
Net Interest 10 15 14 16 Net Deferred tax assets 3,401 3,369 3,369 3,369
Other Income 1,299 1,644 1,801 2,037 Other Non-Current Assets 713 1,070 1,313 1,698

Profit Before Tax 4,495 4,455 5,642 7,271 Current Assets

Margin (%) 15.4 13.4 15.0 17.1 Investments 852 1,454 2,756 4,220
Inventories 23 12 51 58
Total Tax 1,066 1,013 1,411 1,818 Trade receivables 3,860 3,676 4,933 5,349
Effective tax rate (%) 23.7 22.7 25.0 25.0 Cash & Bank Balance 13,828 10,964 11,108 11,147
Other Current Assets 1,824 3,987 4,501 5,306
Profit after tax 3,429 3,442 4,232 5,453 Total Assets 38,373 40,510 44,142 48,166
Minority interest - - - -
Share Profit from Associate (2,034) 20 - - Equity
Equity Share Capital 2,810 2,810 2,810 2,810
Adjusted PAT 1,395 3,463 4,232 5,453 Other Equity 14,890 16,805 19,132 22,132
YoY gr. (%) (61.5) 148.2 22.2 28.9 Total Networth 17,700 19,615 21,943 24,942
Margin (%) 4.8 10.4 11.3 12.8
Extra Ord. Income / (Exp) - - - - Non-Current Liabilities
Long Term borrowings 37 189 189 189
Reported PAT 1,395 3,463 4,232 5,453 Provisions - - - -
YoY gr. (%) (43.9) 148.2 22.2 28.9 Other non current liabilities - - - -
Margin (%) 4.8 10.4 11.3 12.8
Current Liabilities
Other Comprehensive Income - - - - ST Debt / Current of LT Debt - - - -
Total Comprehensive Income 1,395 3,463 4,232 5,453 Trade payables 3,205 3,466 4,111 4,419
Equity Shares O/s (m) 562 562 562 562 Other current liabilities 20,832 20,610 21,269 21,986
EPS (Rs) 2.5 6.2 7.5 9.7 Total Equity & Liabilities 38,373 40,510 44,142 48,166
Source: Company Data, PL Research Source: Company Data, PL Research

August 9, 2023 4
 Engineers India

Cash Flow (Rs m) Key Financial Metrics

Y/e Mar FY22 FY23 FY24E FY25E Year
Y/e Mar FY22 FY23 FY24E FY25E

PBT 4,495 4,455 5,642 7,271 Per Share(Rs)

Add. Depreciation 236 257 290 323 EPS 2.5 6.2 7.5 9.7
Add. Interest 10 15 14 16 CEPS 2.9 6.6 8.0 10.3
Less Financial Other Income 1,299 1,644 1,801 2,037 BVPS 31.5 34.9 39.0 44.4
Add. Other (1,018) (1,724) - - FCF 0.9 (2.0) 6.9 8.0
Op. profit before WC changes 3,723 3,003 5,946 7,610 DPS 3.0 3.0 3.4 4.4
Net Changes-WC (1,857) (2,783) (671) (1,319) Return Ratio(%)
Direct tax (1,382) (1,347) (1,411) (1,818) RoCE 18.2 15.1 18.4 22.2
Net cash from Op. activities 483 (1,127) 3,865 4,473 ROIC 82.5 34.4 40.7 47.6
Capital expenditures (255) (345) (500) (500) RoE 7.9 18.6 20.4 23.3
Interest / Dividend Income 722 641 - - Balance Sheet
Others 145 2,925 (1,302) (1,464) Net Debt : Equity (x) (0.8) (0.6) (0.6) (0.6)
Net Cash from Invt. activities 613 3,221 (1,802) (1,964) Net Working Capital (Days) 8 2 9 9
Issue of share cap. / premium - - - - Valuation(x)
Debt changes - - - - PER 62.3 25.1 20.5 15.9
Dividend paid (1,461) (1,686) (1,904) (2,454) P/B 4.9 4.4 4.0 3.5
Interest paid - - (14) (16) P/CEPS 53.3 23.4 19.2 15.0
Others (27) (71) - - EV/EBITDA 21.0 24.2 17.7 12.9
Net cash from Fin. activities (1,488) (1,757) (1,919) (2,470) EV/Sales 2.5 2.2 2.0 1.7
Net change in cash (392) 337 145 39 Dividend Yield (%) 1.9 1.9 2.2 2.8
Free Cash Flow 483 (1,127) 3,865 4,473 Source: Company Data, PL Research
Source: Company Data, PL Research

Quarterly Financials (Rs m)

Y/e Mar Q2FY23 Q3FY23 Q4FY23 Q1FY24
Net Revenue 7,820 8,306 8,661 8,083
YoY gr. (%) 20.7 21.9 7.5 0.4
Raw Material Expenses 4,296 4,700 4,814 4,526
Gross Profit 3,524 3,606 3,847 3,558
Margin (%) 45.1 43.4 44.4 44.0
EBITDA 420 465 843 685
YoY gr. (%) (30.4) (25.5) (22.0) 48.9
Margin (%) 5.4 5.6 9.7 8.5
Depreciation / Depletion 66 66 70 74
EBIT 354 399 773 611
Margin (%) 4.5 4.8 8.9 7.6
Net Interest 5 4 4 11
Other Income 669 257 493 926
Profit before Tax 1,018 652 1,261 1,526
Margin (%) 13.0 7.9 14.6 18.9
Total Tax 167 175 462 390
Effective tax rate (%) 16.4 26.8 36.6 25.5
Profit after Tax 851 478 799 1,136
Minority interest - - - -
Share Profit from Associates - - - -
Adjusted PAT 851 478 799 1,136
YoY gr. (%) 43.2 (29.8) (36.7) 125.0
Margin (%) 10.9 5.8 9.2 14.1
Extra Ord. Income / (Exp) - - - -
Reported PAT 851 478 799 1,136
YoY gr. (%) 43.2 (29.8) (36.7) 125.0
Margin (%) 10.9 5.8 9.2 14.1
Other Comprehensive Income - - - -
Total Comprehensive Income 851 478 799 1,136
Avg. Shares O/s (m) 562 562 562 562
EPS (Rs) 1.5 0.9 1.4 2.0
Source: Company Data, PL Research

August 9, 2023 5
 Engineers India
Price Chart Recommendation History

(Rs)
No. Date Rating TP (Rs.) Share Price (Rs.)
175
1 06-Jul-23 Accumulate 116 120

145 2 30-May-23 Accumulate 116 111

3 11-Apr-23 BUY 85 74
116
4 04-Jan-23 BUY 89 80
86 5 04-Oct-22 BUY 89 65

56
Aug - 20

Aug - 21

Aug - 22

Feb - 23

Aug - 23
Feb - 21

Feb - 22

Analyst Coverage Universe

Sr. No. Company Name Rating TP (Rs) Share Price (Rs)
1 ABB India Accumulate 4,119 4,400
2 Apar Industries Accumulate 4,100 3,782
3 Bharat Electronics Accumulate 140 130
4 BHEL Reduce 67 93
5 Carborundum Universal BUY 1,482 1,259
6 Cummins India Hold 1,788 1,796
7 Engineers India Accumulate 116 120
8 GE T&D India Hold 184 216
9 Grindwell Norton BUY 2,604 2,191
10 Harsha Engineers International Accumulate 474 432
11 Kalpataru Projects International BUY 625 555
12 KEC International Hold 645 658
13 Larsen & Toubro BUY 2,955 2,560
14 Praj Industries BUY 475 416
15 Siemens Accumulate 4,018 3,731
16 Thermax Hold 2,613 2,602
17 Triveni Turbine Accumulate 419 398
18 Voltamp Transformers Hold 3,961 4,069

PL’s Recommendation Nomenclature (Absolute Performance)

Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly

August 9, 2023 6
 Engineers India

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August 9, 2023 DN: c=IN, st=Maharashtra,

2.5.4.20=21151ea12dd366d1ac370cb42343ee44b6e851c37bdbac5f86aa4ff3e6948
487, postalCode=400018, street=570,SADHNA HOUSE,PB
MARG,WORLI,Mumbai,Maharashtra-400018,
7
Aggarwal
pseudonym=5359cd84fad1bdb19c658b8fa14b58ef,
serialNumber=7a6f13691881d5a8af6353865a61b48b7040e72f4a1bf53182e368b3c
a14a5e4, ou=NA, o=PRABHUDAS LILLADHER PRIVATE LIMITED, cn=Amnish
Aggarwal
Date: 2023.08.09 08:28:22 +05'30'