MOSL: ENGINEERS INDIA (Buy)-Operating performance below expectations on margin miss
Engineers India: Operating performance below expectations on margin miss
(ENGR IN, Mkt Cap USD1.2b, CMP INR127, TP INR155, 22% Upside, Buy)
- Below estimates at operating level: Sales grew 53% YoY to INR5.7b, ahead of our estimate of INR4.4b. EBITDA grew 6% YoY to INR864m; margin contracted 670bp YoY to 15.1% against our estimate of 21.3%. The margin contraction was due to higher share of EPC sales at 44% in 1QFY19 against 14% in 1QFY18. EBIT margin in the Consulting segment was 28% (flat YoY); EPC segment margin contracted 170bp to 6% in 1QFY19. PAT grew 6% YoY to INR866m, marginally lower than our estimate of INR910m.
- EPC segment drives sales and profitability: Sales in the Consulting segment were INR3.22b (flat YoY) while EPC / Turnkey Project sales were INR2.51b (+393% YoY). EPC segment sales are being driven by the BS-VI upgrade projects for HPCL Vizag and CPCL Manali won in FY17. EBIT margin in the Consulting segment was flat YoY at 28% while EPC segment margin contracted 170bp YoY to 6% in 1QFY19.
- Orders at INR832m (-75% YoY) and order book at INR72.3b (-6% YoY): Key orders won in 1QFY19 were from (a) Dangote Change (INR250m), (b) EPCM Services for Indo-Bangla Friendship Pipeline (IBFPL) Project, and (c) LEPCM order – 500TPD methanol plant for Assam Petrochemicals, Namrup. However, the lack of any large orders led to a 6% YoY decline in order book to INR72.3b.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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