Result Update: Engineers India Ltd - BUY - TP Rs.155 - Kotak

EIL Q2FY19 result met our estimates on improved execution in LSTK (Lump sum turnkey division) division. Order inflows remained strong in the quarter; current order backlog reported at record Rs 114.6 Bn imply four to five years of revenue visibility.

Key Highlights

- Revenue grew 58.8% y/y, reported at Rs 6.8 Bn in Q2FY19 driven by the LSTK (Lumpsum turnkey projects) division. This led to sharp contraction in EIL reported EBITDA margin to 13.4% vis-à-vis 32.4% in Q2FY18. Also, Q2FY18 EBITDA included provision write back of Rs 374 mn which is not present in Q2FY19.

- In Q2FY19, PMC division reported sales at Rs 3.3 Bn (flat y/y). EBIT margin for the segment contracted to 29% vis-à-vis 31.8% in Q2FY18. LSTP division revenues grew substantially to Rs 3.4 Bn in Q2FY19 vis-à-vis Rs 960 mn in Q2FY18.

Valuation & Outlook

We believe that EIL stock is trading at extremely cheap valuation at PER 10.8x FY20 core earnings. Broadly maintain estimates and reiterate BUY with unchanged target price of Rs 155.

Shares of ENGINEERS INDIA LTD. was last trading in BSE at Rs.115 as compared to the previous close of Rs. 119.05. The total number of shares traded during the day was 197359 in over 2075 trades.

The stock hit an intraday high of Rs. 123 and intraday low of 114.3. The net turnover during the day was Rs. 22859426.

Source : Equity Bulls

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