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Hidden Gems Engineers India Target Price 240

ICICIdirect Research 08 Nov 2024 DISCLAIMER

We believe that Engineers India is well positioned to capitalize on the large pipeline of refinery & petrochemical capex in India. The company is also strongly focused on enhancing its green energy business by engaging in projects in green hydrogen & ammonia, biofuels, coal gasification etc

The company’s order inflows remained strong at ~Rs 5140 crore during H1FY25 which is over 100% growth on YoY basis. Order book at ~Rs 12800 crore as of Oct-24 end (4.3x TTM revenue), provides strong revenue visibility for the coming period

H1FY25 was muted for the company with ~19% de-growth in revenues and ~230 bps contraction in margins. However, we expect a significant recovery in 2HFY25 on both revenues and margins front. Management has also maintained its revenue guidance of Rs 3500 crore for FY25, which implies ~30% YoY revenue growth in 2HFY25. Margins are also expected to improve on account of the execution pick-up in margin accretive consultancy segment (where EBIT margins stand at 20-25% vs 5-6% in turnkey segment)

Longer-term prospects also look strong given the healthy pipeline in the domestic hydrocarbon sector with rising opportunities from energy transition. Moreover, the company is focusing on key oil & gas markets such as the Middle East and Africa to increase its exports business

At current prices, the stock is trading at 17.6x P/E on FY26E earnings, which looks attractive considering the strong growth ahead for the company and multiple industry tailwinds. We recommend BUY with a target price of Rs 240 (based on 22x FY26E EPS)

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