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Reliance Securities
Target: ₹107
CMP:₹59.80
Engineers India (ENGR) reported a revenue of ₹810 crore (down 27.8 per cent YoY and up 18.3 per cent QoQ) in Q4FY22 (our estimate of ₹1,080 crore), due to an execution miss in turnkey projects. Revenue of consultancy segment declined 6.3 per cent YoY, while the revenue of turnkey segment fell 40 per cent YoY.
For FY23E/FY24, we lower the PAT estimates by 14.4 per cent/11.4 per cent, factoring the lower execution in turnkey segment.
For FY22, the company’s order inflow grew 8 per cent YoY to ₹1,690 crore, led by the consultancy segment, while the order book declined 4 per cent YoY to ₹7,650 crore (2.7x FY22 revenue). We expect order inflows of about ₹2,000 crore in FY23.
Negative working capital cycle, robust business model, track-record in consultancy of complex/high-value projects, debt-free status, and being a beneficiary of large government projects place ENGR in a sweet spot. Though the exposure to a single sector is a major concern, the company is planning to diversify into crude oil storage, water/waste-water management, non-ferrous metallurgy, ports and LNG. In FY21, the company invested ₹1,250 crore in three projects, and still maintained a cash position of ₹1,320 crore (40 per cent of m-cap). It has maintained an average dividend payout of about 64 per cent over FY18-22.
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