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Reliance Securities
Engineers India (Buy)
CMP: ₹116.65
Target: ₹163
Engineers India emerged as a market leader in Indian hydrocarbon segment with strong expertise in design, engineering and implementation of projects. It has maintained a strong track record in executing several domestic orders, while maintaining long-term relationship with key clients. Engineers India’s order inflow increased by 175 per cent YoY to ₹58.9bn in FY19, as the company secured its largest ever order worth about ₹5,500 crore from HPCL petrochemical complex in Barmer (Rajasthan).
PMC scope in this order is ₹1,180 crore with a turnkey component of ₹4,390 crore. Current order book stands at ₹11,200 crore, (5x of FY19 revenue) up 42 per cent y-o-y. The management expects ordering activity from IOCL’s Brownfield expansions, Panipath expansion and CPCL Nagapatinam in the medium-term.
The management has guided for order inflow of ₹1,800 crore (mainly from consultancy segment) in FY19. We believe Engineers India will remain highly cash-rich and maintain its dividend payout track record of about 50 per cent in FY19-21E as well. Sizeable growth potential in sector, huge imminent capex in hydrocarbon sector, asset-light business model, foray into newer segments/sectors, debt-free balance-sheet, healthy revenue and earnings growth and robust return ratios continue to augur well for EI.
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