MOSL: ENGINEERS INDIA (Buy)-Revenue misses our estimate; order inflows robust
ENGINEERS INDIA: Revenue misses our estimate; order inflows robust
(ENGR IN, Mkt Cap USD0.5b, CMP INR72, TP INR95, 33% Upside, Buy)
Sustenance of order inflows key to future outlook
- ENGR's 2QFY22 revenue was 12% below our estimate, with the miss led by lower than expected revenue in the Consultancy segment. Operating profit came in line with our estimate, with a favorable revenue mix (54% share of Consultancy segment revenue) leading to higher than estimated EBITDA margin at 9.3% (est. 8.2%). Lower than expected other income led to adjusted PAT 15% below our estimates.
- Order inflows in 2Q/1HFY22 stood at INR11.7b/INR14.5b (+96%/+115% YoY), and ~30% higher v/s 1HFY20 levels, thereby indicating a revival in ordering activity in its key end-market of Oil and Gas. While Oil and Gas continues to remain a key end-market for ENGR, the management is exploring other end-markets where its expertise can be implemented (Biofuels).
- Order book declined by 11% YoY to INR80.3b, with an order book-to-revenue ratio at 2.8x - the lowest in the last four years. Owing to superior execution and lower than expected order inflows, a depleting order book remains a concern, though it is not alarming at this stage. We maintain our Buy rating with a TP of INR95/share (11x FY24 EPS).
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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