Buy Engineers India: target rs 350; Anand rathi

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We had initiated a report EIL on 14
th
 March, 2011 with a hold
view now with improving outlook and tempting valuation of
the company, we now initiate a BUY reco for a target of Rs.
350.
Highlights of Analyst meet –
~ INR 22 billion cash in consolidated Balance sheet.
~ Dividend payout ratio is around 30%.
~Strong order book position i.e. 7484 Crores which  provide at
  least 2 ½  years revenue visibility.
 
~EIL is looking to diversify portfolio by entering  into
  EMERGING and SUNRISE sectors - Infra, Water, Fertiliser,
  Nuclear, Solar and city gas distribution.
~Entering into new markets of Brazil and Venezuela.
~EIL has strong technical Know How – already registered 12
  patent and 16 patent applications are pending.
~ EIL entered into fertilizer project after 30 years (setting up
   Brown field fertilizer plant at Panki, Kanpur for JP Associate)
Financial Performance
Strong top line growth, led by growth in Lump Sum Turnkey
Projects:
Engineers India (EIL) posted a robust top line growth of 47.8%
at Rs 946.54 Cr. for Q4, FY 11 with PAT growth of 32.54% at
Rs. 165.57 Cr. for Q4, FY11
Full year basis sales stood at Rs 2948 Crs. Growth of 41.42%
for FY11, while PAT achieved a growth of 20.6%.
However blended margin has seen declining trend because of
change in revenue mix.


Valuations
With huge cash in Balance sheet and plans to diversify business
into various segments open new avenues for top line growth. At
CMP stock is quoting at 14x and 12x for FY12E and FY13E.
With this tempting valuation we initiate a buy with a target of Rs.
350.