11 August 2015
1QFY16 Result Update | Sector: Capital Goods
Engineers India Ltd
BSE SENSEX
27866
Shares O/s (cr)
52-W H/L Range (INR)
1/6/12m Rel. Perf. (%)
Market Cap. (INR cr)
Market Cap. (US$ m)
NIFTY
8462
33.7
283/178
2/0/0
7379
1157
CMP: INR220
YEAR
END
Sales
RPAT
A.EPS
EPS
Gr.(%)
-24
-36
17
(INRCr) (INRCr) (INRCr)
483
308
361
14.3
9.1
10.7
TP: INR255
PE
(X)
15.1
23.7
20.3
P/BV EV/EBITDA
(X)
2.9
2.9
2.8
(X)
7.6
11.1
10.1
Accumulate
Div yld
(%)
3.0
3.2
3.7
ROE
(%)
20.0
12.1
14.0
ROCE
(%)
28.9
18.2
19.8
FY14A 1,846
FY15A 1,713
FY16E
1,690
Result Highlights
In 1QFY15, EIL received INR493cr of consultancy orders vs INR1295cr LY. Backlog at end of the quarter was
INR3665cr - 2.3x TTM revenues. Order inflow in the current year is guided to be strong at INR2300cr in FY16. These
numbers are based on projects planned by PSUs where cashflows have now improved.
Revenues degrew by 10% as turnkey degrew 16% on account of lack of large fresh orders during the past few quarter.
Margins in the quarter have dropped due to early stage in recently bagged consultancy orders. Further, a fixed cost
structure and a 10% drop in revenues impacted margins. This fall in margins and revenues both have contributed to
a 48% drop in EBITDA.
QE Jun-14QE Mar-15QE Jun-15
435
381
55
69
0
5
119
38
80
12.6
32.2
238
197
58
12.0
489
394
94
80
0
5
168
60
109
19.3
35.4
255
234
60
63.6
391
362
28
69
0
9
88
32
57
7.3
35.9
225
165
33
6.3
-5%
-16%
-43%
N.A.
-12%
-29%
-44%
N.A.
59%
-26%
-17%
-30%
59%
-48%
-47%
-48%
% y/y % q/q
-10%
-5%
-48%
-1%
-20%
-8%
-70%
-14%
INR Cr.
Revenue
Expenditure
OP
Other Income
Interest
Depreciation
Profit before tax
Tax
RPAT
OP (%)
Tax rate (%)
Revenue
Consultancy
Turnkey
EBIT
Consultancy
Turnkey
Valuation and view
Oil economics to improve:
MOSL expects under-recovery in O&G to drop sharply and this should help curb fiscal
deficit as well as improve financials (especially cashflows) of Indian Oil PSUs. These Oil PSUs are large clients for
EIL and improvement in cashflows should allow for larger reinvestment and hence orders for EIL. EIL expects works
of the order of INR1500cr for refinery upgradation - totalling upto INR25,000-30,000cr.
Strong order backlog, large order inflows likely:
Order inflow has seen pick-up in FY15. Large orders on the
refinery front are likely to be awarded for completion of the 2012-2017 5 year plan target leading to almost INR5000-
8000cr of consultancy orders and INR15000-20000cr of EPC orders for EIL. EIL, also, stands to gain from consultancy
orders on any water related projects that may come under the River Interlinking Project.
Valuations & Views:
Based on 1Q performance, we have downgraded earnings by 10% for FY16 and FY17. Given
our EPS downgrade for FY16 & FY17, we have reduced target to INR255. After the recent out-performance, Investors
should be ready for a period of underperformance until order inflows drive the stock again. We recommend to
Accumulate the stock from a 1Yr+ perspective.
Ravi Shenoy
(ravi.shenoy@MotilalOswal.com); Tel: +91 22 30896865
 Motilal Oswal Financial Services
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