Engineers India an Outperformer says IDFC research,

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Engineers India (EIL) has over the past four decades emerged as the leading engineering consultancy
company in the hydrocarbon space. EIL’s strong technical skills, ability to offer integrated services in a
timely and cost effective manner, geographical diversification and the resultant secure client base give it an
unmatched competitive edge. Accordingly, EIL is likely to be a key beneficiary of the continued capex in
the hydrocarbon space over the next 10 years. EIL has received inflows of Rs18bn in FY11 till date (47% yoy
growth), resulting in its current order backlog of Rs70bn (+12% yoy). The strong backlog provides revenue

visibility over the next two years, driving 32% revenue CAGR and 15% earnings CAGR over FY10-12. EIL’s
current valuation of 20.6x FY12E earnings is attractive in view of EIL’s strong order backlog and earnings
visibility, superior and improving return ratios and Rs52/share cash on the books. Outperformer.
A leader in the hydrocarbon space: Over the past four decades, EIL has developed the technical skills and
capability to offer integrated services from concept to commissioning for the entire hydrocarbon industry value
chain. Further, EIL’s strong execution team ensures project delivery on schedule and at low costs that have
enabled EIL to develop strong client relationships.
Robust order inflows: EIL’s order backlog is growing rapidly, driven by capacity expansions in the
hydrocarbon space and new areas of growth like infrastructure, mining and metallurgy. Order backlog has
increased from Rs62bn as of end-FY10 to Rs70bn as of June 2010 on inflows of Rs18bn. We expect inflows to
remain strong led by an estimated 100MT in refining capacity addition in the hydrocarbon industry over the
next 10 years.
Strong earnings growth in FY10-12E; Outperformer: The growing order backlog provides visibility for strong
revenue growth (32% CAGR) over the next two years. However, a higher proportion of lumpsum (LSTK)
contracts, vs consultancy projects (PMC), is likely to compress margins by 430bps over FY10-12E, thereby
driving earnings at 15% CAGR over FY10-12. We believe the strong revenue growth is likely to offset the sharp
fall in margins and drive an improvement in return ratios over the next two years. At 20.6x FY12E earnings, we
believe the stock is attractive in view of its superior return ratios, Rs52/share cash on the books and visibility of
strong earnings growth. Initiate with an Outperformer rating and a 12-month price target of Rs405/share.