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Highlights of Q3FY11 results
• Engineers India (EIL) reported Q3FY11 earnings at Rs1.23bn (+10% yoy), in line with estimates.
• Revenues grew by 37% yoy to Rs6.77bn in Q3FY11 (above estimates of Rs6.42bn) led mainly by a 70% yoy jump in
LSTK (lump sum turnkey contracts) revenues. LSTK revenues increased to Rs3.9bn, while revenues from the
consultancy and engineering projects (CEP) segment increased by 9% yoy to Rs2.9bn.
• EBIT margins of the CEP segment increased by 110bps yoy to 46.7% during the quarter, while LSTK segment margins
improved by 350bps yoy to 9.2%. However, overall EBITDA margins fell by 270bps yoy to 23.2%, marginally ahead of
estimates of 23%. Consequently, EIL recorded a 23% yoy increase in EBITDA to Rs1.57bn (our estimates of Rs1.48bn).
• Other income fell by 23% yoy to Rs327mn as cash/investments reduced, following a large dividend payout in FY11
(1,060%).
• EIL has an order backlog of Rs82bn as on December 31 2010, implying an order intake of Rs20bn during the quarter.
The current order backlog is 3.1x FY11E revenues.
Maintain Outperformer
We maintain our EIL estimates at an EPS of Rs14.5/share for FY11 and Rs17.1/share for FY12. EIL’s robust order backlog
provides visibility for strong revenue growth (33% CAGR) over the next two years. However, a higher proportion of
LSTK contracts vs consultancy projects, is likely to compress margins by 320bps 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 16.7x FY12E earnings, we believe the stock is attractive in
view of its superior return ratios, Rs56/share cash on the books and visibility of strong earnings growth. We maintain our
Outperformer rating with a 12-month price target of Rs341/share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Highlights of Q3FY11 results
• Engineers India (EIL) reported Q3FY11 earnings at Rs1.23bn (+10% yoy), in line with estimates.
• Revenues grew by 37% yoy to Rs6.77bn in Q3FY11 (above estimates of Rs6.42bn) led mainly by a 70% yoy jump in
LSTK (lump sum turnkey contracts) revenues. LSTK revenues increased to Rs3.9bn, while revenues from the
consultancy and engineering projects (CEP) segment increased by 9% yoy to Rs2.9bn.
• EBIT margins of the CEP segment increased by 110bps yoy to 46.7% during the quarter, while LSTK segment margins
improved by 350bps yoy to 9.2%. However, overall EBITDA margins fell by 270bps yoy to 23.2%, marginally ahead of
estimates of 23%. Consequently, EIL recorded a 23% yoy increase in EBITDA to Rs1.57bn (our estimates of Rs1.48bn).
• Other income fell by 23% yoy to Rs327mn as cash/investments reduced, following a large dividend payout in FY11
(1,060%).
• EIL has an order backlog of Rs82bn as on December 31 2010, implying an order intake of Rs20bn during the quarter.
The current order backlog is 3.1x FY11E revenues.
Maintain Outperformer
We maintain our EIL estimates at an EPS of Rs14.5/share for FY11 and Rs17.1/share for FY12. EIL’s robust order backlog
provides visibility for strong revenue growth (33% CAGR) over the next two years. However, a higher proportion of
LSTK contracts vs consultancy projects, is likely to compress margins by 320bps 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 16.7x FY12E earnings, we believe the stock is attractive in
view of its superior return ratios, Rs56/share cash on the books and visibility of strong earnings growth. We maintain our
Outperformer rating with a 12-month price target of Rs341/share.
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