Engineers India - Order inflow remains the key:: Prabhudas Lilladher

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􀂄 FY12 earnings grow by 25%, backed by higher OI: Engineers India (EIL) posted a
robust top-line growth of 29% at Rs12.2bn in Q4FY12 which was higher than our
estimate of Rs10bn. Sales composition continues to be skewed towards Lump
Sum Turnkey Projects (LSTK). These projects had a share of 73.5% in total sales
as compared to 68% in Q4FY11 and have grown by 40% YoY. Similarly, LSTK
revenue growth of 47% for FY12 led to a 31% growth in sales. Other Income has
increased by 44% YoY (on account of maturity of FMPs) which aided a 25% YoY
PAT growth at Rs1.9bn in Q4FY12. PAT for FY12 grew by 25% YoY, whereas,
EBITDA grew by 9.9%.
􀂄 Overall margins take a dip: EBITDA margins in Q4FY12 were drastically down by
555bps YoY to 14.6% on account of increased share of LSTK projects. Similarly,
for FY12, it dipped to 19%, down 355bps YoY. Consultancy EBIT decreased by
100bps YoY to 42.3% and LSTK margins dropped by 170bps YoY to 9.8%.
􀂄 Order book update: The current order book stands at around Rs46bn (down
from Rs57bn in Q3FY12) and the order inflow for Q4FY12 stood at Rs500m.
Order inflow was weak at Rs7.5bn. Cash and Equivalents stand close to
Rs16.4bn.
􀂄 Valuations: A weak order inflow would impact the growth in FY13-14. We have,
thus, reduced our estimates and TP. The stock is currently trading at Rs14.2
FY14E EPS with a positive bias in case the order inflow scenario improves. We
maintain ‘Accumulate’ on the stock.