Q4FY18 result highlights
Key positives: Robust execution in LSTK
Key negatives: Weak order intake
Impact on financials: FY19E/ 20E EPS cut by 10% each to Rs6.8/8.6
Valuations & view
PSU OMCs have announced strong expansion plans (both brownfield and greenfield) led by high utilisations. We expect EIL to be an early beneficiary of a pick-up in the investment cycle of the hydrocarbon space over the next 2-3 years. The improved momentum in order inflows is driving improved revenue visibility and margins (execution of large orders and positive operating leverage). We believe valuations of 16x FY20E earnings are attractive given the sharp uptick in order inflows, earnings (15% CAGR over FY18-20E) and superior return ratios. Maintain 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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