Engineers India’s ability to deliver turnkey projects and specialized consultancy to construction projects has made this stock very unique. Investors with long term investment goal (like 3 years and more) may consider this stock as a good buy. Investors can safely assume to accumulate this stock at market drops.

Stock Valuation

At present the market price of stock is trading at Rs 280 levels. Considering its average EPS for last three years (March 2010, 2009 & 2008), the P/E ratio is just 6.21. Which means the stocks is greatly undervalued. Considering its expected EPS in the year 2013, the market price of stock is currently trading at approximately eleven times its earnings.

Profitability of Company

High Price Earning Ratio of say 11 is justified by strong EPS growth (9.7%) of stocks in last five years. The net profit margin of company is as high as 18% and its return of net worth of 46%. As compared to its competitors, high EPS growth rate and high profit margin justifies the premium that investors are paying to buy EIL stock.

Financial Health

At present the Engineers India Ltd has maintained Current Ratio of 1.55 which is moderate and long term debt equity ratio of zero which is phenomenal.

Business

Engineers India Ltd is one of the major players in a very profitable hydrocarbon industry. Engineers India Ltd has expertise in commissioning of refinery units and petrochemical plants. These days oil and gas pipe laying is done extensively around India and EIL is a major service provider to this sector. Engineers India Ltd has also emerged as major service provider for overseas infrastructure project.

Competitive Advantage

Engineers India Ltd enjoys authoritative competitive advantage over its competitors. Particularly in the hydrocarbon and Oil and gas sector, the services of EIL is incomparable. With refinery sector expected to grow at the rate of 25% in the 12^th plan, EIL is set to increase their EPS in times to come.

General Observations

The consultancy business generally provides huge profit margins in the tune of 30 to 40%. This has accounted for such high profitability margins. But now the company is focusing more on EPC contracts, where the profitability is of course less the top line of the company can see a dramatic shift in years to come.

Order Positions

EPC contracts has slowly but steadily started contributing to the top line of the company. With new EPC orders keeps flowing in, it is expected that contribution will even increase. EPC contracts have a tendency of creating precedence which further helps in bagging new orders. The order booking position of EIL is currently Rs 7500 crore which is almost 2.5 times is last declared sale figures.

Engineers India is also planning to enter fertilizer sector by bagging a brown field project order. With Nuclear arena now opening in India, EIL is set to keep their EPS growth rate as robust as before

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