RE- INSTATING COVERAGE

REPORT
November 06, 2018
 Market Cap. (in Mn) 52 Week H/L CMP Target Price
Engineers India Ltd. Rs. 68,562.40 139.45/100.45 102.25 125.08
Market leader having a strong track record
STOCK DATA Engineers India Ltd (EIL) is well placed in a highly competitive market in the engineering and construction segment with an
Recommendation BUY impressive record of executing more than 5,000 assignments and 400 major projects cumulatively valued at around $200 Bn.
EIL presence in well noted in 19 out of 22 refineries setup in India. EIL has Installed 10 out of the 11 mega petrochemical
Reuters Code ENGI.BO plant in India. EIL has leveraged its strong track record in the Indian hydrocarbon and petrochemical sector to successfully
Bloomberg Code ENGR IN expand operations internationally and over the years, the Company has emerged as a global player with the execution of a
BSE Code 532178 number of assignments for international energy majors in Middle East, Africa and South East Asia.
NSE Symbol ENGINEERSIN Robust Financials
Face Value Rs. 5 The company’s zero debt balance sheet, high return ratios and the large cash balance makes the company more competitive
Shares and attractive in the engineering and construction space and allows it to be prepared for any unforeseen circumstances or
631.9 Mn liquidity issues.
Outstanding*
Strong Growth and Increasing Order Book
Avg. Daily The topline of the company grew by 36.7% on a YoY basis in FY19 to INR 24,443 Mn. In FY19 the total order book of the
2,004,104
Volume (6m) company increased by 42.1% to INR 1,11,887 Mn, where the order book in the consultancy business grew by 3.3% and the
Price Performance (%) same in the turnkey business grew by 85.9% growth. The order book of the company was dominated by the turnkey
1M 3M 6M segment suggesting a possibility of margin pressure in the future because the margins in the turnkey business are
(13) (6) (5) comparatively much lower than in the consultancy business.
200 Days EMA Rs. 115 OUTLOOK & VALUATION
* On fully diluted equity Shares The Company has established market leadership position in the country when it comes to engineering and construction
SHARE HOLDING (%) solutions for petrochemical companies. The company’s topline has grown by 36.7% in FY19 where as the bottom line is
more or less flat implying that the increase in turnkey orders, which have low and fixed margins, has created margin
Promoters 52.0
pressure on the company and we expect that the growth of the company will taper down to ~10% CAGR over the next 2
FII 6.5 years owing to the slowdown in consultancy business. We expect the company to deliver an earnings per share of INR
FI/Bank 26.1 6.36 in FY20 & INR 6.95 in FY21 as against INR 5.85 in FY19. Assigning a target multiple of 18x, we derive a price target of
Body Corporate - INR 125.08 over the next 15-24 months, which is an upside of ~21% from current levels. At current level of INR 102.25,
Public & Others 15.4 the stock trades at ~16X of FY20(E) & ~15X of FY21(E) earnings, which we believe makes it a BUY.

Revenue EBITDA PAT NPM REPS P/E P/S P/BV

Y/E Mar
(Rs. Mn) (Rs. Mn) (Rs. Mn) (%) (Rs.) (x) (x) (x)
FY18 17,876 4,130 3,779 21.1% 5.83 18.5 3.8 3.0
FY19 24,443 3,658 3,699 15.1% 5.85 17.5 2.6 2.8
FY20E 27,173 4,076 4,021 14.8% 6.36 16.1 2.4 2.7
FY21E 30,029 4,528 4,391 14.6% 6.95 14.7 2.2 2.5
Please refer to the disclosure on last page 2
 ENGINEERS INDIA LTD.

COMPANY OVERVIEW
ENGINEERS INDIA LTD (EIL) is a leading global engineering consultancy and EPC company. Established in 1965, EIL broadly
operates in two main business segments namely Consultancy Segment and Turnkey Segment, though focused on the Oil & Gas and
Petrochemical Industries the company also offers complete solutions to its clients in sectors such as Infrastructure, Water and Waste
Management, Solar & Nuclear Power and Fertilizers industries. EIL is a ‘Total Solutions’ engineering consultancy company providing
design, engineering, procurement, construction and integrated project management services from ‘Concept to Commissioning’ with
highest quality and safety standards.
EIL has a strong track record in the oil & gas value chain – offshore platforms, oil & gas processing, oil refining, petrochemicals
and pipeline projects. EIL is the preferred partner of all major oil & gas PSUs like IOC, ONGC, HPCL, BPCL, CPCL and MRPL. EIL has a
leadership position in project implementation in almost all major oil & gas verticals. EIL’s technological excellence is driven by 2,339
engineers & professionals in a competent employee base of 2768 employees as on March 31, 2019. The availability of technical
resources per annum is about 4.6 Mn man-hours in EIL’s design offices along with 1.19 Mn man-hours of construction management
services.
1965-67 1969-74 1975-80 1989-94 1997
• EIL Founded & • Expanded into
• Company listed on
began work in petrochemicals, • Expansion in the
BSE & NSE.
refinery segment. metallurgy & offshore and • Set up its R&D
• Miniratna status
• Became wholly fertilizer projects & onshore Oil & Gas centre at Gurgaon.
accorded to the
owned Govt. commenced Segment
company.
Subsidy. overseas operations

2017
2015-16 2014 2007-13 2001-06
onwards
• Foray into
• JV with NFL & FCIL • Conferred Navratna • Successful FPO of infrastructure
with formation of status by GoI. 33.6 Mn shares of sector
• Buy back of shares • Commenced
RFCL • Received largest INR 5 Each.
of EIL services related to
• 10% stake offloaded order from Dangote • Expansion into
by GOI (FPO/OFS). group Nigeria. Fertilizer project sub-surface crude
storages

Source: Company, Sushil Finance Research

July 29, 2019 3
 ENGINEERS INDIA LTD.

BUSINESS OVERVIEW
EIL’s key business segments are Consultancy Services And Turnkey (EPC) Contracts. In the Consultancy Segment, the company
provides the complete range of services required to conceptualize, design, engineer and construct projects to meet client specific
needs where the company’s association with clients extends beyond the commissioning of their plants through monitoring operations
of each plant and accumulating feedback on performance.
In the Turnkey (EPC) Contracts, EIL undertakes projects wherein it takes single point responsibility for managing all elements of
project execution viz. basic & detailed engineering, procurement, plant erection, construction and commissioning. EIL's EPC contracts
generally fall in two broad categories: lump sum turnkey (LSTK) contracts and open book estimate (OBE) contracts. EIL offers EPC
services on its own as well as in association with other established equipment manufacturers and construction companies in India and
internationally.
LINE OF BUSINESS
PETROCHEMICAL &
OIL & GAS INFRASTRUCTURE FERTILIZERS
MINING
Oil and Gas Processing Petrochemicals Smart Cities Strategic Storage & Pipelines

Refinery Mining and Metallurgy Water and Waste Mgt Fertilizers

Source: Company, Sushil Finance Research

July 29, 2019 4
 ENGINEERS INDIA LTD.

BUSINESS SEGMENTS
CONSULTANCY SEGMENT
Contracts under which EIL provides services related to process engineering, detail engineering,
Engineering, Procurement
procurement, construction supervision via coordination of various suppliers & contractors and
& Construction
commissioning & pre-commissioning.

Front End Engineering Upstream process design, residual design and front-end engineering for complete definition of
Design scope for selection of EPC contractor.

Project Management Contracts under which EIL provides comprehensive project management services for
Consultancy implementation of a project though turnkey contractors ensuring.

TURNKEY SEGMENT

Fixed price contracts for engineering, procurement and construction (EPC) single-point
Lump Sum Turnkey (LSTK) responsibility for completion of a project within agreed schedule at awarded turnkey price
changes in scope of work are defined by change orders agreed by both parties.

Open book estimate (OBE) contracts (form of cost reimbursable contract) with a provision for
Open Book Estimate (OBE) conversion to LSTK for a project. Benefits under OBE contracts primarily relate to ensuring
control over the time and expenses for a project and greater certainty of outcome.

Source: Company, Sushil Finance Research

July 29, 2019 5
 ENGINEERS INDIA LTD.

INVESTMENT RATIONALE - A Market Leader having a strong track record

EIL is India’s leading engineering & Consultancy firm with over 6000 projects executed over the 5 decades of operations in the country
worth $200 Bn. Some of the marquee projects being BPCL Refinery-Kochi, Bina Refinery, Panipat Naphta Cracker Unit, Guru Gobind
Singh Refinery-Bathinda.

DOMESTIC TRACK RECORD (AS ON 31-03-2019)

80 major Refinery Projects incl. 10 Green-field Projects 38 Infrastructure Projects 33 Mining & Metal Projects
11 Major Petrochemical Projects 43 Oil & Gas Processing Projects 14 Ports & Storage Terminals
213 Offshore Projects including Process Platforms 24 Turnkey Projects 48 Pipeline Projects
10 Fertilizer Projects Strategic Storages in 3 Locations Captive Power Projects

OVERSEAS PRESENCE
EIL was able to secure various engineering and consultancy assignments in Middle East, Africa, Central Asia, Mauritius and other
overseas geographies against stiff international competition. EIL is pursuing opportunities in other overseas territories as well to
augment its international footprints.

Sector Country Client Sector Country Client Sector Country Client

Nigeria Dangote Nigeria Indo Rama Oil & gas UAE NPCC, ADCO
Nigeria Brass Fertilizers Pipelines UAE GASCO
FERTILIZERS

Bangladesh ERL
REFINERY

Bangladesh BCIC Pipelines UAE NPCC, ADCO

Algeria Sonatarch
Petronas Fertilizer LNG Algeria Sonatarch
Kenya KPRL Malaysia
(Kedah) Sdn. Bhd. Petrochem UAE BOROUGE
Oman Sohar Bahrain ALBA Petrochem Oman Orpic
Source: Company, Sushil Finance Research
July 29, 2019 6
 ENGINEERS INDIA LTD.

MAJOR ONGOING PROJECTS

PROJECT CLIENT PROJECT LOCATION
REFINERY PROJECTS
BS VI Project IOCL Five different locations across India
BS-VI Project CPCL Chennai
BS VI Project HMEL Bhatinda
BS-VI Project MRPL Manglore
Visakh Refinery Modernization Project HPCL Visakhapatnam
Rajasthan Refinery Project HPCL Rajasthan
Mumbai Refinery Expansion Project HPCL Mumbai
MS Block Project BPCL Kochi
Bio Refinery Project NRL Numaligarh
PETROCHEMICALS PROJECT
Propylene Derivative Petrochemical Project BPCL Kochi
Guru Gobind Singh Polymer Addition Project HMEL Bhatinda
Methanol & Formalin Plant APL Namrup, Assam
FERTILIZER PROJECT
Revival of Ramagundam Fertilizer Complex RFCL Ramagundam

Source: Company, Sushil Finance Research

July 29, 2019 7
 ENGINEERS INDIA LTD.

PROJECT CLIENT PROJECT LOCATION

PIPELINE PROJECTS
Dobhi-Durgapur-Haldia Pipeline Project GAIL Dobhi-Durgapur-Haldia
Vijaipur Auraiya Pipeline Project GAIL Vijaipur Auraiya
Kochi-Salem LPG Pipeline Project KSPPL Kochi
South Jetty Pipeline Project IOCL Paradip
INFRASTRUCTURE PROJECTS

Condition Assessment & Feasibility Study, Entry Level Activities Under

NMCG UP & Bihar
Namami Gange Program, NMCG

Laying of Interceptor Sewers for Yamuna at Delhi (DJB) DJB Delhi

Atal Mission For Rejuvenation And Urban Transformation (AMRUT) Govt. of Odisha Different locations of Odisha

Construction of UIDAI Data Centre Complex at Manesar and Bengaluru

UIDAI Different locations across India
and Office Building at Delhi

OVERSEAS PROJECT
Eastern Refinery Limited Unit –II Project BPC Bangladesh
Dangote Refinery & Petrochemical Project DORC Nigeria

Source: Company, Sushil Finance Research

July 29, 2019 8
 ENGINEERS INDIA LTD.

INVESTMENT RATIONALE – Robust Financials

EARNINGS PER SHARE SALES PER SHARE

38.7
5.83 5.85
4.82 28.3
21.5

2016-17 2017-18 2018-19 2016-17 2017-18 2018-19

CASH BALANCE (INR Mn) RETURN RATIOS

27,0 00 26,611
30. 0%

26,0 00
25.1% 25.0%
25. 0%

24,806
25,0 00

18.1% 16.7% 16.3%

20. 0%

11.7%
24,0 00

15. 0%

23,105
23,0 00
10. 0%

5.0 %
22,0 00

0.0 %

21,0 00

2016-17 2017-18 2018-19 2016-17 2017-18 2018-19

Revenue ROE ROCE

Source: Company, Sushil Finance Research

July 29, 2019 9
 ENGINEERS INDIA LTD.

INVESTMENT RATIONALE – Strong Growth

TOTAL INCOME (INR Mn) SEGMENTAL BREAKUP
26,981 66.2%
56.2% 59.4% 57.5%
20,144 20,005 48.8% 51.2%
17,879 17,022 43.8% 42.5%
40.6%
33.8%

2014-15 2015-16 2016-17 2017-18 2018-19

Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19
The total Income of the company showed a 5 Year CAGR Consultancy Turnkey
growth of 7.6%.

EBITDA & EBITDA M(%) PAT & PAT M(%)

16% 16%
1,00 0

15% 15% 18%

1,20 0
15% 16%

900

13% 16%

15% 16%

11%
800 1,00 0

14%

700

12%

800
14% 15%

600 15%

10%

500

8%
600 14% 14%

400

14%

6%
400
300

13%
4%

200

200

100

575 862 915 949 933 2%

689 864 978 908 949 13%

- 0%
- 12%

Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19
EBITDA Margin (%) PAT Margin (%)

Source: Company, Sushil Finance Research

July 29, 2019 10
 ENGINEERS INDIA LTD.

CONSULTANCY PROJECT (INR Mn) TURNKEY PROJECT (INR Mn)

14,160
15,0 00 100 %

15,0 00

13,809 100 %

11,962 10,949 80%

10,370
80%

9,762
81% 78% 60% 7,650 60%

68%
56% 56% 5,036 40%

4,083
40%

44% 44%
2,836
20% 33% 20%

22%
19%
- 0%
- 0%

2014-15 2015-16 2016-17 2017-18 2018-19 2014-15 2015-16 2016-17 2017-18 2018-19
Revenue % of Total Income Revenue % of Total Income

1,04 0

30% 31%

1,02 0
30%
200

7% 8%

180

1,00 0

29% 29% 30%

160
6% 6% 6% 7%

5%
980
6%

29%

140

960

28% 29%

120
5%

940

28%

100 4%

920

900
27% 28%

80

3%

27%
60
880

2%

27%
40
860

1%

896 900 964 1,019 1,011 121 147 175 143 163
26%
840 20

820 26% - 0%

Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19

Operating Profit (INR Mn) Margin % Operating Profit (INR Mn) Margin %

Source: Company, Sushil Finance Research

July 29, 2019 11
 ENGINEERS INDIA LTD.

INVESTMENT RATIONALE – Increasing Order Book

BUSINESS SECURED (INR Mn)
43,052
50,0 00

45,0 00

40,0 00

34,118
35,0 00

30,0 00

25,0 00
20,319
20,0 00

12,533 13,572 14,942

15,0 00

9,900
6,103 4,420 3,860 2,200 2,644 3,036 4,797
10,0 00

5,00 0 911
-

2014-15 2015-16 2016-17 2017-18 2018-19

Consultancy (D) Consultancy (O) Turnkey
D- Domestic |O-Overseas

ORDER BOOK (INR Mn) SECTORAL ORDER BOOK

1.76% 0.02% 0.53%
80,0 00

68,763
70,0 00 Petroleum
60,0 00

50,0 00

40,208 41,739 43,124

37,411
36,992 Infra
30,100
40,0 00

30,0 00

Metal, Power &

20,0 00

7,786
10,0 00

Others
97.69%
-

2015-16 2016-17 2017-18 2018-19 Chemical &

Consultancy Turnkey Fertilizer

Source: Company, Sushil Finance Research

July 29, 2019 12
 ENGINEERS INDIA LTD.

INVESTMENT RATIONALE – Industry Potential IMPORTS AND DOMESTIC OIL PRODUCTION IN INDIA
• As of April 1, 2019, the oil refining capacity of India stood at 249.4 Mn (MBPD)
Tonnes, making it the second largest refiner in Asia. Private companies
own about 35.36% of the total refining capacity.
• India’s energy demand is expected to double to 1,516 MTOE by 2035 0.64 0.68
from 753.7 MTOE in 2017. More over, the country’s share in global 0.74 0.72
0.76 0.76 0.75
0.76
primary energy consumption is projected to increase by 2-folds by 0.67 0.75
2035.
• Consumption of petroleum products in India increased 4.1% to 210Mn
Tonnes in 2018.
• The oil and gas industry is growing robustly and players are
3.2 3.3 3.4 3.7 3.8 3.8 4.1 4.3 4.4 4.5
undertaking investments to cater to the burgeoning demand.
• The industry is expected to attract US$25Bn investments in exploration FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
and production by 2022. Oil Imports Oil Production
• The government allows 100% FDI in upstream and private sector
refining project. EXPORTS OF PETROLEUM PRODUCTS FROM INDIA
• In FY 19, total crude oil imports were valued at US $111.96 Bn as (MMT)
compared to US $87.70 Bn in FY18. In FY19, crude oil imports
increased to 4.53 MBPD from 4.41 MBPD in FY18. 67.9 65.5 66.8
63.4 63.9
• India is one of the largest exporters of refinery products due to the 59.1 60.8 60.5 61.1

presence of various refineries. The country had the fourth largest oil 51.2
refining capacity and fourth largest refinery globally in 2017.
• Exports of petroleum products from India increased from 51.15 MMT
in FY10 to 61.10 MMT in FY19.
• The total value of petroleum products exported from the country
increased to US $38.24Bn in FY19 from US $34.89Bn in FY18.
• HSD was the major export item among petroleum products, followed
by MS, ATF and Naphtha. FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Oil Imports
Source: IBEF, Ministry of Petroleum and Natural Gas, BP Statistical Review 2018. MTOE: Million Ton Oil Equivalent, MBPD: Million Barrels per day
July 29, 2019 13
 ENGINEERS INDIA LTD.

UPSTREAM (Exploration)
ANNUAL CRUDE OIL PRODUCTION (IN MMT) CRUDE OIL PRODUCTION (IN MMT)

20.1 18.4 18.2 18.9

21.3 19.1 18.4 18.1 16.9 9.7 10.5 11.6 12.1 11.8 11.4 10.5 10.1 9.9
3.6 3.9 3.7 3.5 3.4 3.4 3.3 3.3 3.3

24.5 23.7 22.6 22.3 22.3 22.4 22.2 22.3 21.0

16.4 18.0 19.4 19.6 18.5 17.9 17.6 17.5 17.3
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18** FY19*
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18** FY19*
ONGC OIL PVT/JV
Onshore Offshore

DEVELOPMENT DRILLING ACTIVITIES (FY18P) EXPLORATION ACTIVITIES (FY18P)

During FY18(P),
1,228,000 Mtr
of wells were
explored and
649 developed and 266
545 wells were
drilled in the 149
country.
165
338.0 59.0 85.0
63.0
Offshore Onshore Offshore Onshore
Wells Meterage ('000 Mtrs) Wells Meterage ('000 Mtrs)

Source: IBEF, Ministry of Petroleum and Natural Gas, BP Statistical Review 2018.
July 29, 2019 14
 ENGINEERS INDIA LTD.

MIDSTREAM (Storage and Transportation)

Shares in crude pipeline network by length (out Shares in crude pipeline network by length (out
of 10,419 km, Apr 1, 2019) of 145.6 MMTPA, Apr 1, 2019)

IOCL 19.23% IOCL

25.36%
33.38%
OIL OIL
50.88%
ONGC
12.31%
ONGC
5.77% Others
Others 41.62%
11.45%

PARTICULARS IOCl BPCL1 HPCL2 OIL ONGC CAIM HMEL GAIL & Petronet Total Industry
LENGTH (KMS)
Product Pipeline 8,769 2,241 3,341 654 - - - 2,395 17,430
Crude Oil Pipeline 5,301 937 - 1,193 1,283 688 1,017 - 10,419
Total 14,049 3,178 3,371 1,847 1,283 688 1,017 2,395 27,489
CAPACITY OF CRUDE OIL PIPELINES (MMTPA)
Product Pipeline 45.6 19.5 38.1 1.7 - - - 9.4 114.3
Crude Oil Pipeline 48.6 6.0 - 8.4 60.6 10.7 11.3 - 145.6
Total 94.2 25.5 38.1 10.1 60.6 10.7 11.3 9.4 259.9

Source: IBEF, Ministry of Petroleum and Natural Gas, BP Statistical Review 2018,BMI.
July 29, 2019 15
 ENGINEERS INDIA LTD.

DOWNSTREAM (Refining & Processing)

SHARES IN INDIA'S TOTAL REFINING CAPACITY (AS
REFINERY CRUDE THROUGHPUT (MMT)
OF APR 1, 2019)

IOCL
4.6%
6.1%
91.2 88.0 RIL
91.1 8.0% 27.8%
88.5 88.7
88.3 88.2
81.4 81.2 BPCL
33.43 38.29 48.54 74.44
10.9%
HPCL

108.0 112.5 112.2 112.1 115.1 122.6 130.6 134.2 134.7 144.2 154.3 160.8 169.2 Essar
15.4%
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19* 27.4% ONGC
Public Sector Private Sector CPCL

REFINERY CRUDE THROUGHPUT (MMT)

88.2
95.0 95.0 105.5
76.5 93.0 95.0 95.0 95.0

116.9 120.1 120.1 120.1 120.1 135.1 139.0 142.1 161.2

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19*

Public Sector Private Sector

Source: IBEF, Ministry of Petroleum and Natural Gas, BP Statistical Review 2018,BMI.
July 29, 2019 16
 ENGINEERS INDIA LTD.

INVESTMENT RATIONALE – Shale Gas Prospects Of India

• India has technically recoverable shale gas resources of nearly 63 Trillion Cubic Feer. (TCF)
• The Cambay, Krishna Godavari, Cauvery and the Damodar Valley are the most prospective sedimentary basins for carrying out
shale gas activities in the country.
• Around 20 TCF of gas has been classified as technically recoverable reserves in the Cambay basin in Gujarat (the largest basin in
the country) spread across 20,000 gross square miles with a prospective area of 1,940 square miles.
• It is estimated that the Krishna Godavari (KG) basin encloses a series of organically rich shale, containing around 27 TCF of
technically recoverable gas. KG basin, located in Eastern India, holds the country’s largest shale gas reserves, extending over
7,800 gross square miles with a prospective area of around 4,340 square miles.
• In April 2013, the Directorate General of Hydrocarbons (DGH) submitted its policy on exploitation of shale gas to the Ministry of
Petroleum and Natural Gas.
• India launched its policy on shale gas exploration to tap the non-conventional energy resource in order to boost output.
• Great Eastern Energy Corp (GEECL) will invest US$ 2 billion over the next ten years in West Bengal to explore shale gas reserves.
• Indian companies are invited to explore partnership opportunities in Vaca Muerta, Argentina which is known to be one of the
largest deposits of shale gas in the world.

Source:
E&Y; Ministry of Petroleum and
Natural Gas, Aranca Research

July 29, 2019 17

 ENGINEERS INDIA LTD.

INCOME STATEMENT
Amounts in INR Mn

Y/E March FY18 FY19 FY 20E FY21E

Revenue 17,876 24,443 27,173 30,029
Tech Assistance/Sub Contracts 2,121 4,511 5,081 5,675
Construction Material & Equip 998 6,116 6,875 7,687
Employee Cost 7,571 7,571 8,288 9,009
Other Expenses 3,055 2,588 2,853 3,129
EBITDA 4,130 3,658 4,076 4,528
EBITDA M(%) 23.10% 14.96% 15.01% 15.07%
Depreciation 238 224 234 240
Finance Cost 6 12 14 11
Other Income 1,795 2,251 2,310 2,462
PBT (as reported) 5,681 5,673 6,138 6,740
Tax 1,902 1,974 2,118 2,349
RPAT 3,779 3,699 4,021 4,391
APAT 3,779 3,699 4,021 4,391
PAT M(%) 21.14% 15.13% 14.79% 14.62%
REPS 5.83 5.85 6.36 6.95
AEPS 5.83 5.85 6.36 6.95

July 29, 2019 18

 ENGINEERS INDIA LTD.

BALANCE SHEET
Amounts in INR Mn
PARTICULARS FY18 FY19 FY20E FY21E PARTICULARS FY18 FY19 FY20E FY21E
Share capital 3,160 3,160 3,160 3,160 Current Liabilities 21,401 24,001 24,188 24,529
Reserves and surplus 19,519 19,599 21,024 22,581 Trades payable 2,180 2,476 2,662 3,003
Minority Interest - - - - Other Financial Liabilities 4,165 3,555 3,555 3,555
Net Worth 22,679 22,758 24,184 25,741 Other current liabilities 10,277 13,197 13,197 13,197
Short term provisions 4,667 4,761 4,761 4,761
Long term borrowings - - - -
Current Tax Liabilities (net) 112 13 13 13
Short term borrowings - - - -
Total Borrowings / Debt - - - -
Net Current Asset 14,160 13,479 14,905 16,462
Capital Employed 22,679 22,758 24,184 25,741
Non Current Assets 5,673 6,388 6,388 6,388
Gross Fixed Assets 3,070 2,976 2,976 2,976 Investments 2,190 2,740 2,740 2,740
Property, Plant & Equipment 2,204 2,159 2,243 2,306 Loans 338 399 399 399
Capital WIP 234 337 253 189 Other Financial Assets 9 4 4 4
Investment Property 288 274 274 274 Deferred Tax Assets(Net) 3,029 2,969 2,969 2,969
Intangible Assets 343 207 207 207 Non-Current Tax Assets (Net) 10 171 171 171
Other Non Current Assets 97 106 106 106
Current Assets 35,561 37,481 39,093 40,991
Inventories 11 69 44 49
Non Current Liabilities 224 85 85 85
Investments 250 461 461 461
Other Financial Liabilities 65 39 39 39
Trade receivables 5,449 4,141 5,435 6,170
Cash and cash equivalents 24,806 26,611 26,954 28,111 Long Term Provisions 73 31 31 31
Loans 103 131 131 131 Other Long Term Liabilities 86 15 15 15
Other Financial Assets 3,563 4,445 4,445 4,445
Other Current Assets 1,377 1,623 1,623 1,623 Capital Employed 22,679 22,758 24,184 25,741
Source: Company, Sushil Finance Research
July 29, 2019 19
 ENGINEERS INDIA LTD.

FINANCIAL RATIOS
Ratios FY18 FY19 FY20E FY21E Ratios FY18 FY19 FY20E FY21E
Growth (%) Valuations (x)
Revenue 23.4% 36.7% 11.2% 10.5% P/E 18.5 17.5 16.1 14.7
EBITDA 36.7% -11.4% 11.4% 11.1% P/BV 3.0 2.8 2.7 2.5
EBIT 13.0% 0.0% 8.2% 9.7% P/Sales 3.8 2.6 2.4 2.2
PAT 16.3% -2.1% 8.7% 9.2% EV / EBITDA 10.5 10.4 9.2 8.1
EPS 21.0% 0.4% 8.7% 9.2% EV / Net Sales 2.4 1.6 1.4 1.2
Mcap / Net Sales 3.8 2.6 2.4 2.2
Profitability (%)
EBITDA Margin 23.1% 15.0% 15.0% 15.1% Turnover Days
EBIT Margin 31.8% 23.3% 22.6% 22.5% Debtors Days 94.7 71.6 73.0 75.0
PAT Margin 21.1% 15.1% 14.8% 14.6% Inventory Days 0.4 0.8 0.8 0.8
Creditors Days 75.3 46.7 48.0 49.0
Per Share Data WC Cycle 19.8 25.7 25.8 26.8
EPS 5.83 5.85 6.36 6.95
BVPS 35.89 36.02 38.27 40.73 Others
Sales per share 28.29 38.68 43.00 47.52 Current Ratio 1.7 1.6 1.6 1.7
Quick Ratio 1.7 1.6 1.6 1.7
Gearing Ratio Interest Coverage 994.0 462.6 452.8 624.4
Debt/Equity - - - - Fixed Asset Turnover 5.7 5.1 5.1 5.1

Source: Company, Sushil Finance Research

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 ENGINEERS INDIA LTD.

OUTLOOK & VALUATION

The Company has established market leadership position in the country when it comes to engineering and construction
solutions for petrochemical companies. The company’s topline has grown by 36.7% in FY19 where as the bottom line is more or
less flat implying that the increase in turnkey orders, which have low and fixed margins, has created margin pressure on the
company and we expect that the growth of the company will taper down to ~10% CAGR over the next 2 years owing to the
slowdown in consultancy business. We expect the company to deliver an earnings per share of INR 6.36 in FY20 & INR 6.95 in
FY21 as against INR 5.85 in FY19. Assigning a target multiple of 18x, we derive a price target of INR 125.08 over the next 15-24
months, which is an upside of ~21% from current levels. At current level of INR 102.25, the stock trades at ~16X of FY20(E) &
~15X of FY21(E) earnings, which we believe makes it attractive.

KEY RISKS
INCREASED EXPOSURE TO TURNKEY BUSINESS
Although the company has shown strong execution in the past, it still faces the risk of delay in project execution owing to
reason other than company’s control. Also the company faces an unprecedented threat of slowdown in the business secured as
seen in the consultancy business.

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 ENGINEERS INDIA LTD.

Research Associate Sales

Dhruvin Upadhyay | +91 22 4093 4082 Devang Shah | +91 22 4093 6060/62
dhruvin.upadhyay@sushilfinance.com devang.shah@sushilfinance.com

Rating Scale
This is a guide to the rating system used by our Institutional Research Team. Our rating system comprises of six rating categories, with a corresponding risk rating.

Risk Rating
Risk Description Predictability of Earnings / Dividends; Price Volatility
Low Risk High predictability / Low volatility
Medium Risk Moderate predictability / volatility
High Risk Low predictability / High volatility

Total Expected Return Matrix

Rating Low Risk Medium Risk High Risk
Buy Over 15 % Over 20% Over 25%
Accumulate 10 % to 15 % 15% to 20% 20% to 25%
Hold 0% to 10 % 0% to 15% 0% to 20%
Sell Negative Returns Negative Returns Negative Returns
Neutral Not Applicable Not Applicable Not Applicable
Not Rated Not Applicable Not Applicable Not Applicable

Please Note
• Recommendations with “Neutral” Rating imply reversal of our earlier opinion (i.e. Book Profits / Losses).
• ** Indicates that the stock is illiquid With a view to combat the higher acquisition cost for illiquid stocks, we have enhanced our return criteria for such stocks by five
percentage points.
• Stock Review Reports: These are Soft coverage’s on companies where Management access is difficult. Views and recommendation on such companies may not
necessarily be based on management meeting but may be based on the publicly available information and/or attending Company AGMs. Hence Stock Reviews may be
just one-time coverage’s with an occasional Update, wherever possible.
…

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 ENGINEERS INDIA LTD.

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Sushil Financial Services Private Limited Analyst Stock Ownership No

Member : BSE / NSE - SEBI Regn. No. INZ000165135 Stock Recommended to Clients Yes
Research Analyst – SEBI Registration No. INH000000867 Remuneration/Benefits received from company in 12 months No
Regd. Office : 12, Homji Street, Fort, Mumbai 400 001. Merchant Banking Market Making activities / projects No
Phone: +91 22 40936000 Fax: +91 22 22665758 Sushil Financial Services Pvt. Ltd and Group Companies Holding Yes
Email : info@sushilfinance.com
Sushil Financial Services Pvt. Ltd and Group Directors Holding Yes
Broking Relationship with the company covered No

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