Buy This Navratna Stock For A Gain of +33% Suggested By Motilal Oswal

Buy This Navratna Stock For A Gain of +33% Suggested By Motilal Oswal

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2QFY22 performance of Engineers India Ltd.

According to Motilal Oswal, “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 a 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 continue to remain a key end-market for ENGR, the management is exploring other end-markets where its expertise can be implemented (Biofuels).” The brokerage has said in its research report that the company’s “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.”

The company’s “Other income stood at INR284m (below our estimate of INR400m). PBT stood at INR832m, down 33% YoY and 11% below our estimate. The effective tax rate stood at 28.5% (v/s 25.3% YoY). Adjusted PAT stood at INR595m, down 36% YoY and 15% below our estimate. Consultancy revenue stood flat YoY at INR3.5b in 2QFY22. PBIT declined by 150bp YoY to 25.5%. Order inflow stood at INR11.7b. Turnkey: Revenue fell 12% YoY to INR3b in 2QFY22. PBIT increased by 60bp YoY to 2.5%” said Motilal Oswal in its research report.

Buy Engineers India Ltd with a target price of Rs. 95

Buy Engineers India Ltd with a target price of Rs. 95

According to the highlights from the management commentary, the brokerage has said that “In the non-Oil and Gas space within the Consultancy segment, its decision to undertake new projects won’t solely be dependent on margin, but will be strategically evaluated on a case-to-case basis. ENGR aims to win ~INR18b worth of orders in 2HFY22.”

According to the brokerage’s call “We maintain our earnings estimate and forecast a revenue/EBITDA/PAT CAGR of – 6%/14%/11% over FY21-24E. We expect a reversal in revenue mix in favor of the Consultancy segment to aid profitability over FY22-24E. We maintain our Buy rating with a TP of INR95 per share, assigning INR71 to its core business (11x FY24E core EPS) and INR24 for cash on its books.”

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal Financial Services Limited. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

Original news source Credit: www.goodreturns.in



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