Engineers India Ltd (EIL), a Central Public Sector Undertaking (CPSU) under the Ministry of Petroleum and Natural Gas, has established itself as a top consulting and engineering services provider in India. With a legacy that spans multiple decades, EIL is at the forefront of various industries, from petroleum refining and oil & gas to infrastructure and environmental services. In recent years, EIL has shown resilience and strategic acumen in managing projects both domestically and overseas. With its stock currently trading at around Rs 196, a price-to-earnings (PE) ratio of 29.8, and a market cap of approximately Rs 11,034 crores, investors are increasingly interested in the company’s growth potential.
In this blog, we’ll dive deep into EIL’s financial performance, analyze its key revenue drivers, examine its asset and liability structure, and provide projections for short-term and long-term price targets. Let’s get started!
Table of Contents
Engineers India Ltd: Company Overview and Strategic Position
Engineers India Ltd is renowned for its comprehensive project management capabilities. The company operates in several critical industries, including petroleum refining, petrochemicals, pipelines, oil & gas, mining, and more. EIL’s business model is divided into two primary segments: consultancy & engineering projects (43% of revenue) and turnkey projects (57% of revenue). The company has a strong domestic focus, with around 93% of its revenue coming from within India, but it is also expanding its international presence, with projects in Nigeria, Mongolia, and the UAE.
With a robust order book of Rs. 7,990.6 crore as of December 2023, the company’s future appears promising. Its recent ventures include investments in the Numaligarh Refinery Ltd., a gas-based fertilizer project in Telangana, and a partnership with Munitions India Ltd. for defense-related projects. EIL’s strategic focus on diversification, innovation, and R&D (with 34 live patents) strengthens its market position, allowing it to cater to both domestic and international clients.
Fundamental Analysis
The financial analysis of Engineers India Ltd., as depicted in the uploaded image, provides insight into the company’s historical and projected performance. Let’s break down the key metrics from the image.
Sales, Net Profit & Operating Profit (Amount in Crores)
- Sales Growth: From March 2018 to the projected March 2025, EIL’s sales have shown a steady increase, from Rs. 1,824 crore in March 2018 to a predicted Rs. 3,527 crore in March 2025. This upward trend demonstrates the company’s consistent revenue growth despite economic challenges.
- Net Profit: The net profit figures have fluctuated over the years, with a notable decline from Rs. 383 crore in March 2018 to Rs. 140 crore in March 2022. However, the predicted recovery to Rs. 478 crore by March 2025 suggests a positive outlook.
- Operating Profit: Operating profit has also experienced fluctuations, peaking at Rs. 455 crore in March 2020 before declining in the following years. The projected increase to Rs. 398.96 crore by March 2025 reflects EIL’s ongoing efforts to optimize operational efficiency.
Operating Profit Margin (OPM)
EIL’s operating profit margin has seen a decline from 23.52% in March 2018 to a projected 11.31% in March 2025. The decrease in OPM indicates increased competition and cost pressures in the industry. However, EIL’s diversification and focus on higher-margin consultancy projects could stabilize this trend over the long term.
Earnings Per Share (EPS) in Rs
EIL’s EPS has shown resilience, recovering from a low of Rs. 2.48 in March 2022 to a projected Rs. 8.51 by March 2025. This growth is a positive signal for investors, reflecting the company’s improved profitability and operational efficiency.
Return on Equity (ROE)
ROE is an essential indicator of a company’s profitability relative to shareholder equity. For EIL, ROE has been somewhat volatile, peaking at 17.62% in March 2020 and then dropping to 7.91% in March 2022. However, with projections reaching 21.31% by March 2025, EIL appears well-positioned to deliver improved returns to shareholders.
Asset Distribution (Amount in Crores)
The asset distribution highlights EIL’s investment structure:
- Investments dominate with Rs. 1,389 crore, indicating a strong focus on long-term growth.
- Otherr Assets amount to Rs. 3,021 crore, showing significant infrastructure backing.
- CWIP (Capital Work in Progress) and Fixed Assets collectively add up to Rs. 332 crore, underscoring ongoing projects and operational support.
Liability Distribution (Amount in Crores)
EIL’s liability structure reflects a stable financial position:
- Reserves account for Rs. 1,974 crore, providing a solid financial buffer.
- Equity Capital stands at Rs. 281 crore, supporting the company’s expansion.
- Other Liabilities amount to Rs. 2,454 crore, with minimal reliance on debt, which strengthens EIL’s financial health.
Growth Potential and Strategic Expansion
With strong revenue growth and expanding operational capabilities, Engineers India Ltd is strategically positioned for long-term growth. Here’s what makes EIL a potential investment candidate:
- Robust Order Book: The company’s Rs. 7,990.6 crore order book as of December 2023 indicates a solid pipeline of projects.
- International Expansion: EIL’s overseas presence in markets like the Middle East, Africa, and South Asia adds diversification and reduces dependency on domestic projects.
- Defense Sector Foray: The recent MoU with Munitions India Ltd highlights EIL’s strategic diversification into the defense sector, which could be a lucrative segment.
- R&D and Innovation: EIL’s Gurgaon R&D center, with 34 live patents, showcases its commitment to innovation, which is essential for maintaining a competitive edge in engineering and consulting.
Investment Outlook
With its current trading price as on 01/11/2024 at Rs 196 and a PE ratio of 29.8, EIL offers growth potential for both short-term and long-term investors. Here’s a suggested price target and stop loss based on current analysis:
- Short-Term (3 months): Target Price: Rs. 240 | Stop Loss: Rs. 180
- Long-Term: Target Price: Rs. 290 | Stop Loss: Rs. 170
These targets reflect a balanced approach, considering the company’s fundamentals and growth prospects.
FAQs
What does Engineers India Ltd specialize in?
What is the revenue mix of Engineers India Ltd?
How has EIL’s profitability been over recent years?
Is Engineers India Ltd expanding internationally?
What is EIL’s current stock price and market cap?
Is Engineers India Ltd a good long-term investment?
What are the short-term and long-term price targets for EIL?
Conclusion
Engineers India Ltd is a well-established player in India’s engineering and consultancy sector, backed by a solid portfolio of domestic and international projects. The company’s consistent revenue growth, strategic diversification into sectors like defense, and strong R&D foundation position it well for the future. While EIL faces challenges in operating margins, the projected growth in EPS and ROE highlights its potential for profitability.
For investors looking to diversify their portfolio with a stable yet growing public sector company, Engineers India Ltd appears to be a solid pick. Its mix of domestic and international projects, coupled with a focus on high-growth areas, makes EIL a promising candidate in the Indian stock market.
Check out In-depth Fundamental Analysis of TCS
Check out In-depth Fundamental Analysis of INFOSYS
