| Recommended Price | Rs 202 |
|---|---|
| Target Price | Rs 235 |
| Upside % | 16.3% |
| Investment Horizon | 1 year |
Engineers India Ltd., founded in 1965, is a major Indian company that works mainly with the oil, gas, and petrochemical sectors. They’re experts in designing equipment for heating and transferring materials, solving environmental problems, choosing the right materials for jobs, and making sure plants run smoothly and safely. They’ve expanded their skills to include projects like building infrastructure, managing water and waste, and working on solar and nuclear energy, as well as fertilisers. The company isn’t just big in India; it also works in places like the Middle East, Africa, and parts of Asia. They offer a full range of services, from the initial design to the final steps of building a project, making sure everything meets top-notch quality and safety standards. Essentially, they help turn big project ideas into reality, overseeing everything from start to finish.
Why do we need to invest in Engineers India?
Strong order book backed by a healthy track record
As of December 31, 2023, Engineers India Ltd. had a total of Rs. 79,906 million in orders waiting to be completed. This includes Rs. 47,510 million worth of consulting jobs and Rs. 32,396 million in big project contracts. In just nine months, they managed to get new orders worth Rs. 30,465 million, with consulting and turnkey (complete package) projects making up the new additions. This big list of orders means the company can expect steady income for a while. Most of these orders, about 62%, come from the oil and gas industry, which remains the company’s main focus. Given their earnings of Rs. 33,300 million in the financial year 2023, it looks like they have enough work lined up for over two years. It’s clear that Engineers India Ltd. has the skills and experience to handle these orders on time.
Focus on consultancy segment by entering into new segments provide strong growth visibility
Engineers India Ltd.’s consulting part of the business is expected to grow because it’s getting back on its feet with lots of new and ongoing orders from both India and other countries. The company is diving into new areas like green hydrogen, ammonia, biofuels, coal gasification, and defence projects, which should make the consulting side even more profitable. They’re also aiming to win more contracts from places far and wide, including South America, the Middle East, and Africa. This move to work in new markets and different parts of the world means Engineers India Ltd. is likely to see good results from its consulting work soon.
Valuation and Outlook
Engineers India Ltd., known for its top-notch engineering and project delivery, especially in the oil & gas industry, is broadening its horizons. The company’s strong performance in complex projects has set it up for growth, particularly with the government boosting infrastructure projects. It’s stepping into new areas focused on reducing carbon emissions, like project management for future energy technologies. Factors like a strong financial standing, good returns on investments, a solid lineup of projects, moving into new business areas focusing on environmental sustainability, and expanding into new places are all driving the company towards hitting a revenue target of Rs. 5,000 crores soon. Given the company’s knack for winning new contracts and its reputation for delivering quality projects, we recommend buying its stock. We predict a 17% increase in its stock price over the next 12 months, setting a target price of Rs. 235, based on our financial analysis.
