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Hidden Gems Engineers India Target Price 240
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)
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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