Engineers India Upgraded to Buy, Target Price Rs 271 by Prabhudas Lilladher
Engineers India's Mixed Quarterly Performance Amid Geopolitical Disruptions
In a recent research report, Prabhudas Lilladher has revised its estimates for Engineers India's (EIL) FY27E and FY28E earnings per share (EPS) by -6.3% and -3.4%, respectively, due to a cautious outlook on the company's Middle East operations amid ongoing geopolitical disruptions.
EIL's quarterly performance was mixed, with revenue declining approximately 8% year-over-year (YoY) against a higher base. The company's EBITDA margin also contracted by 523 basis points YoY to 16.4% against a higher base. However, the order book remains healthy at approximately Rs151 billion, with 72% contribution from the consultancy segment, providing a healthy multi-year revenue visibility.
The management has guided for FY27 order inflow of approximately Rs80 billion and consultancy revenue growth of 15-20%, supported by the execution ramp-up in recently secured domestic and overseas consultancy projects. However, management has highlighted a temporary slowdown in Middle East hydrocarbon project awards amid geopolitical tensions, with delays in greenfield project finalization and slower decision-making likely to impact large-ticket order inflows.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
| Company | Q1 FY28 Revenue Growth YoY | Q1 FY28 EBITDA Margin |
|---|---|---|
| Engineers India | -8% | 16.4% |
Despite this slowdown, EIL continues to strengthen its Middle East presence through long-term agreements with Saudi Aramco, which are expected to support recurring consultancy opportunities. Domestic consultancy opportunities remain healthy across refinery expansions, coal gasification, CBG, biofuel, and infrastructure projects, while overseas growth is expected to be driven by Africa supported by large Dangote refinery and fertilizer consultancy contracts.
Infrastructure and energy-transition segments are also gaining traction with increasing opportunities in data centers, institutional infrastructure, and coal gasification projects, aiding diversification beyond the traditional hydrocarbon business.
Outlook
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
We believe EIL's long-term growth prospects remain intact given:
- Strong order book prospects in non-oil & gas and oil & gas projects
- Strong traction in overseas consultancy business from the Middle East & Africa region
- Opportunities in energy transition & infrastructure
- Lean balance sheet
The stock is currently trading at a price-to-earnings (PE) ratio of 18.2x/15.0x on FY27/28E. We roll forward to Mar'28E and maintain our 'Buy' rating, valuing the Consultancy/Turnkey segments at a PE of 22x/10x Mar'28E (22x/10x Sep'27E earlier), arriving at a stock price target of Rs271 (Rs261 earlier).
Investor Takeaway
Engineers India's revenue and EBITDA margin declined due to geopolitical disruptions, but the order book remains healthy.
More in Market
Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
Indian Stocks to Watch: BHEL, Agarwal Industrial, JBM Auto, Rajesh Exports, Indian Energy Exchange, Lenskart Solutions in Market Focus on June 4.
