ENGINEERS INDIA LTD - Analyst Views

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IndiaBulls has the following view on the Follow on Public Offering,

EIL is a premier engineering consultancy and turnkey contracting company with vast experience and proven track record. With its unmatched technical capabilities, past experience, and focus on R&D activities, EIL is best placed to benefit from the capex of these segments. Moreover, the Company has excellent order book position of Rs. more than 6,000 crore which provides strong earnings visibility for next 3-4 years. Going forward, we expect EIL’s consolidated revenues to grow by 22% to 25% from FY11E to FY 15E.

We value the stock at Rs. 356 by using the DCF method. As the Company is principally focused on projects in oil and gas exploration, development and production, and transportation projects, it has no immediate listed peer company. However, if we compare it to the other engineering and
manufacturing enterprises (BHEL, BEL), we find that the PE for FY10 of 20.47x on the lower band and 21.98x at upper band which is quite attractive. Given its strong engineering capabilities & immense experience of executing large projects with robust order book and strong financial base of the company, we recommend investors to subscribe to the issue.

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Microsec has the following recommendation,

At the upper price band of INR290.00, EIL is priced at 21.9x times of its FY2010 Diluted Earnings per Share (EPS) of INR13.19. Five year average P/E for the company is 23x. It is at a discount of 9% from its CMP of INR316.75 as on July 26 2010. The company’s performance during Q1 FY 2011 has been good with growth in both top-line and bottomline. We expect EIL to be a long-term growth story and hence recommend ‘SUBSCRIBE’ to the stock.

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Views of HDFC Sec on Engineers India Ltd,

The issue is being made at 20.5-22.0 times its FY10 EPS. While there are no comparable peers as there are no listed engineering consultancy firms, large cap engineering stocks like BHEL, Larsen & Toubro etc quote at a P/E of 22-25 times their trailing EPS. While a consultancy firm could get a similar or slightly higher valuation, the issue pricing (especially at the higher band) leaves very little on the table for non-retail investors (near term upside seemed capped in the Rs.315-335 band) while leaving a little more for retail investors who would get a 5% discount on the determined price.

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Unicon Wealth Research has the following Views,

With competitive skills in engineering design and consultancy business where there are few players, EIL enjoys high operating profit margin, blended margin well above 20% compared to ~8-16% for pure EPC contractors. With sound order-book of ~INR 63bn (FY10) and positive macro environment, both at domestic level and globally in general and in the Middle-east (ME) and Africa region in particular, we expect EIL to sustain its historical track record of performance, going forward as well. With diversification into waste water management and power, leveraging on its project execution skills in the hydro-carbon segment and cash of ~INR 17bn, company can also aggressively map its growth plan.
 
EIL, at the upper price band of INR 290/share is valued at 14.6x (13.6x on lower band) of its FY12e (our back of the envelop calculation) per share earning INR 19/share which is attractive, SUBSCRIBE

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ARM Reserach of Mumbai has the following recommendation,

EIL which is operating in a high-end engineering, design and consulting business is not only a unique company in itself but also enjoys lucrative margins given its presence in the hydrocarbon space. Earnings growth of 38 per cent compounded annually over the last three years, a nil debt status and superior return on equity are healthy factors Further the has strong cash of Rs 17945Mn in the balance sheet as on 31st Mar,2010 along with the robust order book of Rs 62,360Mn as on 31st Mar,2010 provides a earning visibility for next 2.5 – 3 years

Further EIL is also diversifying into new potential areas like infrastructure, power, and waste water management and city gas for future growth.
We recommend the Investors to “Subscribe” to the issue. Short term investors are advised to book profits on listing gains while long term investors can continue to hold the stock for next 2-3 years.

[komal]

Religare Price Target for Engineers India Ltd

The current order backlog of Engineers India (ENGR), at Rs 62.4bn (or 3.1x of its FY10 sales), provides high revenues visibility over the next two years. Based
on the current execution profile, we expect the company’s revenues to grow at a 41.2% CAGR over FY10E-FY12E. At our current earnings estimate of
Rs 15.5/ Rs 22.1, the stock is trading at a P/E of 21.2x/ 14.9x for FY11E/ FY12E. We believe that given ENGR’s high growth and return profile and the low
capital intensity of its business model, the current valuations hold significant upside potential. Hence, we initiate coverage on the stock with a Buy recommendation and a one-year target price of Rs 400