Buy Engineers India, target price Rs 112: ICICI Securities

ICICI Securities has given a buy rating to Engineers India with a target price of Rs 112. The share price moved up by 3.07 per cent from its previous close of Rs 79.90. The stock’s last traded price is Rs 82.35.

Execution on HPCL Barmer orders has commenced and HPCL Vizag project has gained traction resulting in strong 39 per cent year on year growth in revenues to Rs 8.5 billion led by 74 per cent year on year growth under lump sum turnkey at Rs 4.5 billion, while consultancy segment grew 14 per cent year on year to Rs 4 billion.

Investment Rationale

According to the brokerage, Engineers India reported better than expected execution in Q4FY20 and is confident of revival of overall project activities post lockdown. Order intake outlook continues to be strong on the back of budgeted contracts from BPCL and IOCL. Ordering on the Numaligarh project is likely to be in phases and, given aggressive pricing, EIL is not keen on it. With the orderbook strong at Rs 95.6 billion (3 times trailing twelve month sales) and the encouraging order intake pipeline, growth outlook is healthy.

Factoring-in Covid related slippages, the brokerage has cut FY21E and FY22E earnings by 10 per cent and 4.5 per cent respectively. Given the medium to long term growth visibility and through valuation at 11.9 times FY22E earnings, the brokerage maintains buy rating on the stock with a revised target price of Rs 112 (earlier: Rs 103).

Earnings Estimate Revision

Engineers India-MotilalOswalJune292020

Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 864.38 crore, down -3.87 per cent from last quarter sales of Rs 899.17 crore and up 39.85 per cent from last year’s same quarter sales of Rs 618.08 crore. The company reported net profit after tax of Rs 128.98 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 51.50 per cent stake in the company as of March 31, 2020, while FIIs held 7.59 per cent, DIIs 25.51 per cent and public & others 15.4 per cent.

Source: ET Markets

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