Engineers India order book supports consultancy growth despite Middle East project delays
Engineers India Ltd.
BUY
₹216
₹268.6
₹271
25.46%
Investment View and Target Price
In its May 23, 2026 Q4FY26 result update, Prabhudas Lilladher maintained its BUY rating on Engineers India (EIL) and increased its target price to Rs 271 from Rs 261. The broker believes EIL’s long-term growth outlook remains intact, supported by a substantial order book, opportunities across oil and gas and non-oil and gas projects, growing overseas consultancy traction, emerging energy-transition and infrastructure opportunities, and a lean balance sheet.
However, PL reduced its FY27E and FY28E EPS estimates by 6.3 per cent and 3.4 per cent, respectively, due to a cautious outlook for Middle East operations amid geopolitical disruption.
Q4FY26 Operating Performance
Q4FY26 operating performance was weak against a high base and below PL’s estimates. Consolidated revenue declined 8.3 per cent year-on-year to Rs 926.3 crore, compared with PL’s estimate of Rs 1,138.2 crore. Revenue from both Consultancy and Engineering Projects and Turnkey Projects declined year-on-year.
| Metric | Q4FY26 | Year-on-year change | PL estimate |
|---|---|---|---|
| Consolidated revenue | Rs 926.3 crore | Down 8.3% | Rs 1,138.2 crore |
| Consultancy and Engineering Projects revenue | Rs 516.7 crore | Declined | — |
| Turnkey Projects revenue | Rs 409.6 crore | Declined | — |
| Gross margin | 55.4% | Down 266 bps | — |
| EBITDA | Rs 151.8 crore | Down 30.5% | 30.5% below estimate |
| EBITDA margin | 16.4% | Down 523 bps | — |
| Adjusted PAT | Rs 195.5 crore | Down 10.5% | Rs 259.5 crore |
The decline in gross margin was attributed to lower-margin consultancy order execution. EBITDA margin contracted because of the lower gross margin and higher other expenses. For FY26, consolidated revenue rose 19.9 per cent to Rs 3,701.7 crore, while EBITDA increased 4.1 per cent to Rs 447.2 crore.
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Order Book and Execution Outlook
The key support for the investment thesis is EIL’s order book of Rs 15,110 crore, equivalent to 4.1 times trailing 12-month revenue. Consultancy accounted for 72 per cent of the order book, comprising 29 per cent domestic consultancy and 43 per cent overseas consultancy, while turnkey work accounted for 28 per cent.
Q4FY26 order inflow was Rs 3,710 crore, up 21 per cent year-on-year. Management guided for around Rs 8,000 crore of FY27 order inflow, broadly in line with FY26. Recently secured large consultancy projects from FY25 and FY26 are expected to enter peak execution over the next two to three years.
- Medium-term consultancy revenue growth is expected at around 15 to 20 per cent year-on-year.
- Expected consultancy margins are around 22 to 25 per cent.
- Expected turnkey/LSTK margins are around 5 to 7 per cent.
Middle East and International Opportunities
Management identified a temporary slowdown in Middle East greenfield hydrocarbon project awards. Geopolitical tensions have delayed finalisation and decision-making rather than caused cancellations. The Middle East accounted for around 30 per cent of FY26 overseas order inflow and 10 to 15 per cent of EIL’s order book.
EIL’s Saudi office and its In-Kingdom Services agreement with Saudi Aramco should support recurring bidding opportunities. An Out-of-Kingdom Services agreement is expected shortly. Management expects the Middle East and Africa to become meaningful growth drivers from FY28 and FY29 as investment normalises.
Africa is supported by a Dangote Group refinery and fertiliser consultancy contract exceeding USD 430 million, with around four years of execution.
Domestic Growth and Energy-Transition Opportunities
Domestic opportunities include the IOCL Paradip Phase-2 and BPCL Andhra refinery projects, both expected in FY27. Coal-gasification consultancy opportunities are estimated at around Rs 300 to 400 crore per project. Infrastructure represented around 25 per cent of FY26 order inflows, with opportunities in engineering-intensive institutional projects and data centres.
EIL is also pursuing opportunities in coal gasification, biofuels, sustainable aviation fuel and a CBG plant in Maharashtra.
PL Forecasts
| Metric | FY27E | FY28E |
|---|---|---|
| Revenue | Rs 4,374.7 crore | Rs 5,300.8 crore |
| EBITDA margin | 14.6% | 15.8% |
| Adjusted EPS | Rs 11.9 | Rs 14.4 |
Valuation
PL values EIL using a sum-of-the-parts approach, rolling forward to March 2028 estimates. It assigns 22 times March 2028E PE to the consultancy business and 10 times to the LSTK business. Investments in Numaligarh Refinery are valued at 1.5 times price-to-book, while the Ramagundam Fertilizer Project is valued at 1.0 times price-to-book. This produces the target price of Rs 271.
Principal Risks
- Prolonged geopolitical disruption and slower large-ticket Middle East awards.
- Lower execution.
- Pressure on consultancy margins.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
