Q3FY19 result highlights
Order outlook remains strong for FY20-21E:
o Expansion of IOCL’s Panipat refinery from 15mtpa to 25mtpa (1H20)
o BPCL Mumbai order for revamp of additional units (1H20)
o Mid-range orders (~Rs4-8bn) expected from overseas in 1QFY20
o Expansion of BPCL’s Numaligarh refinery from 3 to 9mtpa (2HFY20)
o 9mtpa greenfield capacity of CPCL Nagapatnam in FY20E
o Expansion of Bina & MRPL in initial evaluation stage
Impact on financials: FY19E EPS at Rs7.3; FY20E EPS cut by 3.8% to R7.3
Valuations & view
EIL has seen a strong uptick in order intake and backlog led by capacity expansions by PSU OMCs considering high utilisation levels. We expect the trend to continue over the next 2-3 years as companies continue to invest towards capacity expansion. The improved momentum in order inflows is driving higher revenue visibility for EIL. While near term earnings are impacted by delayed execution in PMC and higher LSTK revenues, we believe earnings will see sharp momentum in FY20E (22% growth). Accordingly, we believe valuations of 15.2x FY20E earnings are attractive given the uptick in order inflows and superior return ratios. Outperformer.
Engineers India Limited (EIL) is an engineering consultancy, and engineering, procurement and construction (EPC) company in the hydrocarbons and petrochemicals industry. The Company's segments are Consultancy & Engineering Projects, and Turnkey Projects. Its services include technologies, pre-Front End Engineering Design (FEED) and FEED, project management, procurement services, construction services and specialized services. The Company focuses on various sectors, including fertilizer and liquefied natural gas (LNG), non-ferrous metallurgy, infrastructure, strategic crude oil storage, nuclear and solar energy, and exploration and production. It offers various technologies for petroleum refining, oil and gas processing, and aromatics. The Company's projects include Guru Gobind Singh Refinery Project, Bina Refinery Project, Panipat Naphtha Cracker Project, Dabhol Bangalore Pipeline Project, Phase II Expansion of Alumina Refinery and Deen Dayal Field Development Project.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
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