ReinstatingCoverage

EngineersIndiaLtd.
FEBRUARY24,2012 BUY MEDIUMRISK PRICERs.252 TARGETRs.312

ENGINEERING

SHAREHOLDING(%)
Promoters FII FI/MF BodyCorporate Public&Others

EngineersIndiaLtd.(EIL)isaleadingengineeringconsultancyandturnkeycontractingcompany,which executes projects on conventional and lumpsum turnkey (LSTK) basis in refineries, petrochemicals, pipelines,offshoreplatforms,metallurgy,infrastructure,fertilizeretc.Overtheyears,ithasdeveloped anextensivetrackrecordofworkingwithalmostallthemajorplayersinhydrocarbonsectorinIndia andhassignificantindigenoustechnologyandengineeringexpertise.Leveragingitsstrongtrackrecord inIndia,EILhasalsosuccessfullyexpandeditsbusinessinternationallywithwiderangeofengineering consultancyservices,particularlyintheMiddleEast,NorthAfricaandSouthEastAsia.

80.4 5.1 8.0 1.7 4.8

LeadingConsultancyandEPCCompanyinIndianHydrocarbonSector
EILisoneofAsiasleadingengineeringcompanies,providingengineeringconsultancy&turnkeyproject contractingservicesacrosshydrocarbonvaluechain.ItistheonlyplayerinIndianhydrocarbonsector whichprovidescompleteConcepttoCommissioningservicesunderoneumbrella,throughitsrangeof services such as feasibility studies, project management, planning & scheduling, process design & constructionmanagement.EILishavingimmenseexperienceandlongtrackrecordofexecutingseveral largeprojects,whichincludemorethan49projectsinrefinery,7inpetrochemicals,37inpipelines,240 offshoreandonshoreoil&gasprojects,26inmining&metallurgyetc.Italsohastechnicalalliances with leading global players for the technologies used in various projects. Hence, with its strong technicalcapabilitiesandvastexperienceofexecutinglargeprojectsinpast,theCompanycontinuesto beoneoftheleadingserviceprovidersformostofthePublicSectorUnits(PSUs)inoil&gassectors.

STOCKDATA
ReutersCode BloombergCode
BSECode NSESymbol Market Capitalization* Shares Outstanding* 52Weeks(H/L) Avg.Daily Volume(6m) ENGI.BO ENGRIN 532178 ENGINERSIN Rs.84.9bn US$1.72bn 336.94mn Rs.322/195 60,153Shares

IncreasedOutlayforHydrocarbonSectorin12thPlanABigOpportunityforEIL
Asperdraftpaperon12thplanbyplanningcommission,Indiasoilandgasrequirementsareexpected toreach204.8mtoe&87.2mtoerespectivelybyFY17.IndiawouldneedtoinvesttothetuneofRs.2.8 trillionintheoilandgassectorduringthe12thPlanperiodforexpandingdomesticandinternational infrastructure, be it in terms of refining capacity (302 MMTPA by 2017), pipelines (additional 15,500 km) and city gas distribution network (over 200 cities to be covered). Hence, investments in these segmentswilldrivegrowthforconsultancy&EPCplayersinhydrocarbonsegment.EIL,beingapremier engineeringconsultancyandEPCcompanywithvastexperienceandlongtrackrecord,isbestplacedto benefit from the capex of these segments. EIL expects business opportunities worth Rs. 1,550 bn in hydrocarbonsector(includingRs.880bninrefinery)during12thPlanperiod.

DecentOrderBookProvidesGrowthVisibility
EILscurrentorderbookpositionstandsatRs.56bn(1.6xitsTTMRev),whileitsYTD(AprJan2012) order inflows remained sluggish at about Rs. 7.0 bn as most of upcoming projects in hydrocarbon segmentsareinfinalizationstageandlikelytobeawardedfromQ1FY13onwards.ThoughEILexpects its FY12 order inflows to be muted at Rs. 15 bn, the ordering environment is expected to improve significantly from FY13 onwards as three major refinery orders from BPCL & HPCL are likely to be awarded in H1FY13. IOCL, Indias largest refiner, is also expected to invest in capacity expansion for next45years,creatingbusinessopportunitiesforEIL.Hence,weexpectEILsorderinflowstoremain verystrongfornext23yearsas62MMTPArefiningcapacityisexpectedtobeaddedduringFY1217 along with investment for expansion of pipeline and Oil & Gas exploration capacity. Going forward, withitscurrentorderbookposition&prospectiveorderpipeline,thevisibilityoftoplinegrowthfor twoyearsisveryclearandEILisexpectedtodeliverRevenueCAGRof~21%duringFY1114E.

PricePerformance(%) 1M 11 3M 19 6M (4)

200DaysEMA:Rs.255 *Onfullydilutedequityshares Partof Bonanza

DiversifyingPortfoliobyEnteringintoNewGrowthSegments
The Indian infrastructure sector provides attractive opportunities, given the expected USD 1trillion investments in the next five years. Hence, leveraging its strong engineering consultancy and EPC capabilities, EIL is exploring opportunities in high growth area like renewable energy, nuclear power, infrastructure, city gas distribution and fertilizer. The work on developing entrylevel strategies and acquisitionofrequisiteskillsetsinthesepotentialareashasalreadybeeninitiated.Thesesectorsare expectedtocontributesignificantlyforthenext35yearsandwilldiversifyEILsbusinessportfolio.

StrongBalancesheetwithDecentGrowthOutlook

ANALYST
DhananjayMishra|+912240935084

Consideringitsdecentorderbookandstronggrowthexpectedinorderinflowsinnexttwoyears,we expect EILs Consolidated Revenues to grow by 26.7%, 21.2% & 16% in FY12E, FY13E & FY14E, respectively.EILalsohasstrongbalancesheetwithnegativeworkingcapitalandhighcashtotuneof Rs.21bn(Rs.62cashpershare).TheCMPofRs.252discountsitsFY13E&FY14EconsolidatedEPSof Rs.21.5&Rs.24by11.7x&10.5x,respectively.WehavevaluedEILat13xitsFY14Eearnings,which wouldbestill~15%discountto5yearsmeanandreinstatecoveragewithtargetpriceofRs.312.

dhananjay.mishra@sushilfinance.com

KEYFINANCIALS (Consolidated)
Y/EMar. FY11 FY12E FY13E FY14E Revenue (Rsmn) 28,482 36,081 43,725 50,737 APAT (Rsmn) 5,313 6,395 7,231 8,076 AEPS (Rs) 15.8 19.0 21.5 24.0 AEPS (%Ch.) 20.6 20.4 13.1 11.7 P/E (x) 16.0 13.3 11.7 10.5 ROCE (%) 53.6 50.3 46.1 42.3 ROE (%) 35.7 33.8 30.6 28.1 P/BV (x) 5.7 4.5 3.6 3.0

SALES: DevangShah|+912240936060/61 devang.shah@sushilfinance.com

Pleaserefertoimportantdisclosuresattheendofthereport

ForprivateCirculationOnly. Member:BSEL,SEBIRegn.No.INB/F010982338|NSEIL,SEBIRegn.No.INB/F230607435. Phone:+912240936000Fax:+912222665758Email:info@sushilfinance.com

SushilFinancialServicesPrivateLimited
Regd.Office:12,HomjiStreet,Fort,Mumbai400001.

EngineersIndiaLtd.

COMPANYBACKGROUND
Incorporated in 1965, EIL is a leading engineering consultancy company, principally focusedontheoil&gasandpetrochemicalsindustriesinIndiaandOverseas.Ithasalso diversified into other sectors including nonferrous mining, metallurgy, infrastructure, fertilizer, power (solar & nuclear), water & waste management etc. EIL currently has a highly skilled & professional employee base of 3,500 people of which 82% are with technical and professional qualifications. Being a technology driven organization, it has established a sophisticated R&D center in Gurgaon and has developed or obtained advancedtechnologies,whichitlicensestocustomersintheoil&gas,andpetrochemical industries. Its business is aligned into two segments the Consultancy segment and the Lumpsum Turnkey (LSTK) Projects segment. The Projects on which it provides engineering consultancy, project management and implementation services are included in the Consultancy,whileProjectsundertakenonaturnkeybasisareincludedinLSTKProjects segment. KeyMilestonesforEIL:WithmorethanfourdecadesofexperienceintheHydrocarbon space,thecompanyhasachievedseveralmilestones.

Source:EILAnnualReport

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EngineersIndiaLtd.

ServiceOffering:FromConcepttoCommissioning
Its services cover the entire spectrum of activities from concept to commissioning of a project, which includes preparation of project feasibility reports, technology selection, project management, process design, basic & detailed engineering, procurement, inspection, project audit, supply chain management, cost engineering, planning & scheduling, facilitation of statutory & regulatory approvals, construction management, andcommissioning.

Source:EILAnnualReport

OverseasPresence
Leveraging its track record in India, EIL has successfully expanded its operations in overseasmarketsprovidingawiderangeofengineeringconsultancyservicesonvarious internationalprojects, particularly in the Middle East, North Africa and South East Asia. EIL has earned recognition for jobs executed in overseas countries such as West Asia, North Africa, Europe and South Asia including Algeria, Bahrain, Iran, Kuwait, Korea, Malaysia, Norway, Qatar, Saudi Arabia, Sri Lanka, UAE, Vietnam, etc. The company has established international offices in Abu Dhabi, London, Milan and Shanghai for its internationaloperations.

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EngineersIndiaLtd.

INVESTMENTRATIONALE LeadingConsultancyandEPCCompanyinIndianHydrocarbonSector
EILisoneofAsiasleadingengineeringcompanies,providingengineeringconsultancy& turnkeyprojectcontractingservicesacrosshydrocarbonvaluechain.Itistheonlyplayer in Indian hydrocarbon sector which provides complete Concept to Commissioning services under one umbrella, through its range of services such as feasibility studies, project management, planning & scheduling, process design & construction management. Over the years, EIL has developed a strong track record of working on landmarkprojectswithvariousIndianandglobalenergymajors.Ithasprovidedarange ofengineeringconsultancyandprojectimplementationservicesonmorethan49refinery projectsincludingnineGreenfieldrefineryprojects,7petrochemicalcomplexes,35oil& gas processing projects, 205 offshore platforms projects, 37 pipeline projects, 11 ports and storage and terminals projects, 8 fertilizer projects, and 26 mining & metallurgy projects.Intheinfrastructurespace,ithasprovidedarangeofengineeringconsultancy services for more than 26 projects, including for airports, highways, flyovers, bridges, water&sewermanagement,aswellasenergyefficientbuildings.EILhasalsocompleted 16turnkeyprojects,includingrefinery&petrochemicalprojectsandoffshoreplatforms. Hence, with its strong technical capabilities and vast experience of executing large projects in past, the Company continues to be one of the leading service providers for mostofthePublicSectorUnits(PSUs)inoil&gassectors.

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EngineersIndiaLtd.

IncreasedOutlayforHydrocarbonSectorin12thPlanABigOpportunityforEIL
As per draft paper of planning commission, Indias oil and gas requirements are expected to increase at CAGR of 6.5% during 12th plan (FY1217) to reach 204.8 mtoe (from 164.3 mtoe in FY11) & 87.2 mtoe (from 58 mtoe in FY11) respectively by FY17. Hence,IndiawouldneedtoinvesttothetuneofRs.2.8trillionintheoilandgassector during the 12th Plan period for expanding domestic and international infrastructure. During12thplan,therefiningcapacityisexpectedtoincreaseby62MMTPAtoreach302 MMTPAbyFY17,while15,500kmadditionalpipelinecapacityistargetedtosupportoil andgastransportation.Thecitygasdistributionnetworkisalsoexpectedtoincreaseto over200cities.Hence,investmentsinthesesegmentswilldrivegrowthforconsultancy & EPC players in hydrocarbon segment. EIL, being a premier engineering consultancy andEPCcompanywithvastexperienceandlongtrackrecord,isbestplacedtobenefit fromthecapexofthesesegments. Indiasrefiningcapacityadditionduringfiveyearplans

Source:Draftpaperofplanningcommissionon12thPlan

Generally,thecompaniesinhydrocarbonsegmentfinalizetheircapacityadditionplanin advanceandawardingofcontractspicksupduringinitial23yearsoffiveyearplansand consequently,theorderinflowsforEPC &consultancyservicesprovidersincreaseata fasterpaceduringtheseperiods.Duringfirsttwoyearsof11thplan(FY0709),EILalso recordedastrongCAGRof43.3%initsorderinflowand72%initsorderbookposition. Hence,itdeliveredverystrongCAGRof48.7%initsConsolidatedRevenuesduringFY07 11. As 12th plan begins from April 2012, EIL is expected to receive decent number of orders during next 23 years. EIL expects business opportunities worth Rs. 1,550 bn in hydrocarbonsector(includingRs.880bninrefinery)during12thPlanperiod. Revenuevs.OrderinflowsGrowth

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EngineersIndiaLtd.

DiversifyingPortfoliobyEnteringintoNewGrowthSegments
The Indian infrastructure sector provides attractive opportunities, given USD 1trillion investments expected in the next five years. Hence, leveraging its strong engineering consultancy & EPC capabilities, EIL is exploring opportunities in high growth area like renewableenergy,nuclearpower,infrastructure,citygasdistributionandfertilizer.The workondevelopingentrylevelstrategiesandacquisitionofrequisiteskillsetsinthese potential areas has already been initiated. These sectors are expected to contribute significantlyfornext35yearsandwilldiversifyEILsbusinessportfolio.

IndiasInfrastructureInvestment
FiguresinUSDbn InvestmentAmount %ofGDP

10th Plan 218 5.0

11th PlanEstimate 514 9.0

12th PlanEstimate 1000 10.0

DiversifyingthebusinessPortfolio

Fertilizers: In Fertilizer sector, EIL has secured a major breakthrough with award of a majorcontractforsettingupofAmmonia&UreaFacilitiesforJaiprakashIndustriesLtd. Thenewunitsarescheduledtocompletein33months.Theprocessdesignpackagewill beprovidedbyM/sKBR,USAforAmmoniaandM/STOYO,Japan,forUrea.EIL'sscope consistsofresidualprocessengineering,detailedengineeringforallUtilitiesandOffsites withoverallprojectmanagementservices.EILisalsoconsideringparticipationinrevival ofclosedunitsofpublicsectorgasbasedfertilizerplantsalongwithstrategicpartners. EILalongwithNFLiscurrentlyinprocessofrevivaloftheRamagundamfertilizerunitof FCI. EIL and NFL combine will take 51% stake in special purpose vehicle that will be formedforrevival,whileapartnerfortherestisyettobedecided.EILisexpectedto investaboutRs.4bnovernext34yearsandalsoexpectedtogetconsultancyorder. Water&WasteManagement:Inthissector,EILintendstofocusonwaterdesalination and treatment projects, urban water distribution projects, waste water collection & treatment,wastewaterdisposal,andresiduedisposalprojects.Theindustrysizeofthis segmentisaboutRs.80bn.EILwillcontinuetotargetengineeringconsultancyandPMC opportunities as well as EPC projects. It is currently executing a project of Sewerage System,supplementary&ShahdaraDrainsforDelhiJalBoard(DJB).
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EngineersIndiaLtd.

City Gas Distribution: The central government is targeting to expand Indias City Gas Distributionnetworkinmorethan200citiesby2017and330citiesby2025from100 citiescoveredatpresent.GivenEILstrackrecordofprovidingengineeringconsultancy and EPC services for urban infrastructure projects and crosscountry hydrocarbon projects,thecitygasdistributionsectorprovidesattractiveopportunities.EILintendsto pursue strategic city gas distribution projects through equity investments to own and operatesuchnetworks.IthasalreadysignedMoUwithGSPCinthisarea. Nuclear Power: Currently, 20 Nuclear Power Reactors are operational in India with a total installed capacity of 4,780 MW, which is expected to increase to 20,000 MW by 2020. With a view to expand its operations in the Nuclear Sector, EIL has signed a Memorandum of Cooperation (MOC) with Nuclear Power Corporation of India Ltd. (NPCIL). Under this agreement, EIL will carry out the engineering, procurement, constructionandprojectmanagementfornuclearandbalanceofplantareasofnuclear powerplants. RenewableEnergy:NationalSolarMissionplansforacapacityof22,000MWby2022. AsapartofEILseffortstoenterintorenewableenergysector,itparticipatedinthe1st phaseoftheNationalSolarMissiontobidfora5MWSolarPhotovoltaicPowerProject alongwithGAIL.EILalsoprovidedProjectManagement&ConsultancyservicestoGAIL foritsbidof50MWSolarThermalProject.
DecentOrderBookPositionProvidesGrowthVisibility

DuringFY0711,thecompanyhasrecordedastrongCAGRof20.6%initsorderinflow. However,itsYTD(AprJan2012)orderinflowsremainedsluggishataboutRs.7.0bnas mostofupcomingprojectsinhydrocarbonsegmentsareinfinalizationstageandlikely tobeawardedfromQ1FY13onwards.ThoughEILexpectsitsFY12orderinflowstobe mutedatRs.15bn,theorderingenvironmentisexpectedtoimprovesignificantlyfrom FY13onwardsasthreemajorrefineryordersfromBPCL&HPCLarelikelytobeawarded inH1FY13.IOCL,Indiaslargestrefiner,isalsoexpectedtoinvestincapacityexpansion fornext35years,creatingbusinessopportunitiesforEIL.Hence,weexpectEILsorder inflows to remain very strong for next 23 years as 62 MMTPA refining capacity is expectedtobeaddedduringFY1217Ealongwithinvestmentforexpansionofpipeline andOil&Gasexplorationcapacity.

Source:Company,SushilFinanceResearchEstimates

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EngineersIndiaLtd.

During FY0711, the company has recorded a strong CAGR 31.8% in its order book positionanditscurrentorderbookstandsatRs.56bn(1.6xitsTTMRev).Goingforward, withitscurrentorderbookposition&prospectiveorderpipeline,thevisibilityoftopline growthfortwoyearsisveryclearandalsoEILislookingatincreasingoverseasbusiness contribution to 25% from present 5% in the next 45 years. Hence, we believe it to deliverRevenueCAGRof~21%duringFY1114E.

Source:Company,SushilFinanceResearchEstimates

Decent Revenue Growth Outlook: EIL has delivered very decent growth during
FY0711 with Consolidated Revenues CAGR of 48.7%. We expect EILs Consolidated Revenues to grow at CAGR of 21.2% during FY11FY14E to reach Rs. 50.7 bn in FY14E fromRs.28.5bninFY11.

Source:Company,SushilFinanceResearchEstimates

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EngineersIndiaLtd.

ThoughEILsconsultancy&EngineeringProjectsbusinesshasdeliveredadecentCAGR of~23%duringFY0711,itsRevenuessharehascomedownfrom86%inFY07to40%in FY11,mainlyduetoverystrongCAGRof~113%witnessedinitsEPCbusinessduringthe sameperiodonfasterexecutionofturnkeyprojects.Weexpectshiftinitsbusinessmix more towards turnkey projects to continue going forward and Revenue share of its consultancy&EngineeringProjectsbusinessisexpectedtostabilizebetween3035%.

SegmentwiseRevenueContribution

Source:Company,SushilFinanceResearchEstimates

EBITDAMarginstoremainstableatabout20%level: Its Consolidated EBITDA

marginsexpandedfrom19.2%inFY07to23%inFY11.Goingforward,itsConsolidated EBITDA margins are expected to stabilize at 20%, due to shift in business mix more towardsturnkeyprojects.

Source:Company,SushilFinanceResearchEstimates

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EngineersIndiaLtd.

DecentProfitGrowth: DuringtheperiodFY07FY11,itsConsolidatedAPATdelivered
a decent CAGR of 38.3%. We expect EILs consolidated APAT to grow at CAGR of 15% duringFY11FY14E.

Source:Company,SushilFinanceResearchEstimates

Strong Balance sheet: EIL has a strong balance sheet with high cash & cash equivalenttothetuneof~Rs.21bn(Rs.62cash/share)asonDec11.EILhasalsobeen consistentin payingdividend,maintainingabove30%payoutandIthasalsodelivered verystrongRoCEandRoE,whicharecurrentlyat50%&34%respectively.

Source:Company,SushilFinanceResearchEstimates *DuringFY10,specialdividendofRs.100declaredonequityshare(Exbonus&split)

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EngineersIndiaLtd.

HighReturnRatio

Source:Company,SushilFinanceResearchEstimates

StrongCashFlowfromoperatingactivity

Source:Company,SushilFinanceResearchEstimates

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ONGOINGPROJECTS
PetroleumRefining
PetroFCC,SulphurBlock,PolypropyleneUnitandSPM&AssociatedFacilitiesforRefinery ExpansionandUpgradationProject(PhaseIII)atMangaloreofMRPL WaxProjectofNumaligarhRefineriesLtd.(NRL)

Petrochemicals
AssamGasCrackerProjectatLepetkataofBrahmaputraCrackerandPolymerLtd.(BCPL) PetrochemicalComplexPhaseIIatVijaipurofGAILIndiaLtd. PhaseIIatPataofGAILIndiaLtd. DahejPetrochemicalComplexofONGCPetroadditionsLtd.(OPaL) BrahmaputraPipelineProjectofBrahmaputraCrackerandPolymerLtd.(BCPL) DabholBangalorePipelineProjectofGAILIndiaLtd. VijaipurKotaPipelineaugmentationforGAILIndiaLtd. HaziraDahejNaphthaPipelineProjectforONGC ParadipSouthJettyPipelineProjectofIOCL CompressorStationsatKailaras&ChainsaofGAILIndiaLtd.

Pipelines

OffshoreOil&Gas
Offshore Well Head platform, ProcesscumLiving Quarter Platform, Subsea & Onshore PipelinesandmiscellaneousinfrastructureworksforDeenDayalFieldDev.ProjectofGSPC

OnshoreOil&Gas
OnshoreGasTerminalatKakinadaforDeenDayalFieldDevelopmentProjectofGSPC WesternOnshoreRedevelopmentProjectatAhmedabad,Ankleshwar&MehsanaofONGC

Metallurgy
ExpansionofBauxiteMinesandAluminaRefineryProject(PhaseII)atDamanjodi,Orissaof NALCO ExpansionofAluminiumSmelterProject(PhaseII)atAngul,OrissaofNALCO 4thStreamUpgradationforAluminaRefineryProjectatDamanjodi,OrissaofNALCO AdityaAluminumProjectatSambalpur,OrissaofHINDALCO MahanAluminumProjectatSingrauli,MadhyaPradeshofHINDALCO

SubSurfaceProjects
CrudeOilStorageinundergroundrockcavernsatVizag,MangaloreandPadurforIndian StrategicPetroleumReservesLtd.(ISPRL) DFR PhII for Strategic Storage of Crude Oil at Rajkot, Padur, Bikaner & Chandikhol for IndianStrategicPetroleumReservesLtd.(ISPRL)

Infrastructure
MumbaiAirportUpgradationProjectofAAI/MIAL LayingofInterceptorSewersforYamunaatDelhiforDelhiJalBoard ConstructionofDataCentrebuildingatDelhi&Bengaluruandconstructionofoffice buildingatDelhiforUIDAI

TurnkeyProjects
PetroFCC,SulphurBlock,PolypropyleneUnitandSPM&AssociatedFacilitiesforRefinery ExpansionandUpgradationProject(PhaseIII)atMangaloreofMRPL OnshoreGasTerminalatKakinadaforDeenDayalFieldDevelopmentProjectofGSPC ParadipSouthJettyPipelineProjectofIOCL

OverseasProjects
Rehabilitation&AdaptationofAlgiersRefineryofNAFTECSpa,ALgeria QusahwiraFieldDevelopmentProjectofADCO,AbuDhabi PipelineProjectsforGASCO,AbuDhabi ProjectEngineeringServicesforBahrainNationalGasCompany

EngineeringDesignServicesforNationalPetroleumConstructionCompany

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EngineersIndiaLtd.

NEWPROJECTS
PetroleumRefineryProjects
Licensor Selection and Process Study Report for FCC revamp at Gujarat Refinery of IOCL Study & Resultant Engineering for reduction of Sodium Residue to meet Coker RequirementinAUIVatGujaratRefineryofIOCL FeasibilityStudyforsettingupofaGrassrootRefineryforIOCL Constructionof4numbersofMoundedBulletsatKochiRefineryofBPCLEIAandRRA StudyforResidueUpgradation&DistillateYieldImprovementwith11MMTPAcrude processingprojectatMathuraRefineryofIOCL. PPunitforRetainingWallandBuildingworksforMRPL.

Oil/GasFielddevelopmentProjects
ConsultancyServicesforrequalification/recertificationof50nos.ofoffshorejacketsof ONGC TechnicalReviewofBidsforrevampofGalekifieldofONGC.

PipelineProjects
Horizontal Directional Drilling (HDD) of Ganga River in route of Auraiya Jagdishpur PipelineofGAILIndiaLtd.

MetallurgyProjects
RectifierGroupReplacementinRectifierStationforHindalcoIndustriesLtd.

PowerProjects
Power Block of 1x125 MW Concentrated Solar Thermal Power Project of Reliance Power(ADAG)forAREVASolarRenewableEnergiesIndiaPvt.Ltd.

TurnkeyProjects
PPunitforRetainingWallandBuildingworksforMRPL

OverseasProjects
TechnicalConsultancyServicesforProjectLotusofONGCVideshLtd. ConsultancyStudyforFireFightingSystems&StrategyatRuwaisRefineryofTAKREER, AbuDhabi Replacementof4portablewatertanksatArzanahfacilitiesofZADCO,UAE HabshanAcidGasFlareRecoveryProjectofGASCO,UAE

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EngineersIndiaLtd.

RISKANDCONCERNS:
Higherdependencyoverhydrocarbonsector DelayinGovt.decisionmakingoncapexplanofPSUs Higherrawmaterialcost Retainingandrecruitingskilledmanpower Inflation&Interestrate

OUTLOOK&VALUATION
Consideringitsdecentorderbookandstronggrowthexpectedinorderinflowsinnext twoyears,weexpectEILsConsolidatedRevenuestogrowat21%CAGRduringFY12 14E.EILalsohasastrongbalancesheetwithnegativeworkingcapitalandhighcashto tuneofRs.21bn.WeexpectEILsConsolidatedRevenuestogrowby26.7%,21.2%& 16% in FY12E, FY13E & FY14E, respectively, while its Net Profits to grow by 20.4%, 13.1%&11.7%inFY12E,FY13E&FY14E,respectively.TheCMPofRs.252discountsits FY13E & FY14E consolidated EPS of Rs.21.5 & Rs.24 by 11.7x & 10.5x, respectively. Consideringitsdecentgrowthprospects,strongbalancesheetwithhighRoE(~34%)& RoCE(~50%), We havevaluedEILat13xitsFY14Eearnings,whichwouldbestill~15% discountto5yearsmeanandreinstatecoveragewithtargetpriceofRs.312. HistoricalPEband

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EngineersIndiaLtd.

PROFIT&LOSS(Consolidated)Rs.mn

BALANCESHEET(Consolidated)Rs.mn
Ason31stMarch EquityShareCapital Applicationmoney Reserves Networth Totalloans CapitalEmployed Netblock CWIP Investments Inventories Sundrydebtors Cashandbank Loansandadvances TotalCurrentassets TotalCurrentliabilities NetCurrentassets NetDeferredtaxliability TotalAssets FY11 1,685 0 13,214 14,899 0 14,899 632 219 5,128 2,137 3,278 17,981 3,827 27,225 20,067 7,158 1,761 14,899 FY12E 1,685 0 17,244 18,928 0 18,928 1,131 160 5,128 2,727 5,437 20,983 4,401 33,548 23,100 10,448 2,061 18,928 FY13E 1,685 0 21,913 23,597 0 23,597 1,527 150 5,128 3,422 6,589 25,699 5,062 40,771 26,308 14,463 2,329 23,597 FY14E 1,685 0 27,032 28,717 0 28,717 1,700 150 5,128 4,027 7,645 31,785 5,821 49,279 30,168 19,110 2,628 28,717

Y/EMarch TotalSales TotalRawmaterials COGS

PersonnelCost OtherExp.

FY11 28,482
14,603

FY12E 36,081

FY13E 43,725 24,980 24,980 6,803 3,070 8,871 155 0 2,158 0 10,874 3,643 7,231 0 7,231 7,231

FY14E 50,737 29,399 29,399 7,792 3,562 9,984 180 0 2,340 0 12,144 4,068 8,076 0 8,076 8,076

#AtexpectedequityinvestmentfromL&TbyFY12

14,603

19,908 19,908 5,930 2,503 7,740 122 0 1,897 0 9,514 3,119 6,395 0 6,395 6,395

5,241 2,091 6,547 145 15 1,597 0 7,984 2,671 5,313 0 5,313 5,313

EBITDA

Depreciation InterestCost OtherIncome ExceptionalItem EBT(asreported) Tax PAT ExtraordinaryItems RPATincl.Extraord.items AdjustedPAT(APAT)

FINANCIALRATIO(Consolidated)
Y/EMarch Growth(%) NetSales EBITDA APAT Profitability(%) EBIDTAMargin(%) NetProfitMargin(%) ROCE(%) ROE(%) PerShareData(Rs.) EPS CEPS BVPS Valuation PER(x) PEG(x) P/BV(x) EV/EBITDA(x) EV/NetSales(x) Turnover DebtorsDays CreditorsDays FY11 41.4 30.6 20.6 23.0 18.7 53.6 35.7 15.8 15.2 44.2 16.0 0.8 5.7 11.1 2.5 42 256 FY12E 26.7 18.2 20.4 21.5 17.7 50.3 33.8 19.0 18.5 56.2 13.3 0.7 4.5 9.0 1.9 55 180 55 170 55 170 11.7 0.9 3.6 7.4 1.5 10.5 0.9 3.0 6.1 1.2 21.5 21.1 70.0 24.0 23.6 85.2 20.3 16.5 46.1 30.6 19.7 15.9 42.3 28.1 21.2 14.6 13.1 16.0 12.5 11.7 FY13E FY14E

CASHFLOWSTATEMENT(Consolidated)Rs.mn
Y/EMarch. Profitaftertax& ExtraordinaryItems Depreciation ChangeinDeferredTax Liability ChangeinWC CashFlowfrom Operating ChangeinGrossPP&E ChangeInInvestments ChangeinMisc.Exp. CashFlowfrom Investing ChangeinDebt ChangeinNetWorth Dividend CashFlowfrom Financing CashattheEndoftheYr FY11 5,313 106 (342) 1,274 6,351 (205) (4,153) 0 (4,358) 0 (3,641) 1,685 (1,956) 17,981 FY12E 6,395 92 (300) (289) 5,898 (531) 0 0 (531) 0 (4,387) 2,022 (2,365) 20,983 25,699 31,785 15 0 (4,752) 2,190 (2,562) 0 (5,484) 2,527 (2,957) (502) 0 0 (502) (307) 0 0 (307) FY13E 7,231 116 (268) 701 7,781 FY14E 8,076 135 (299) 1,439 9,350

Source:Company,SushilFinanceResearchEstimates

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RatingScale
ThisisaguidetotheratingsystemusedbyourInstitutionalResearchTeam.Ourratingsystem comprisesofsixratingcategories,withacorrespondingriskrating.

RiskRating
RiskDescription LowRisk
MediumRisk HighRisk

PredictabilityofEarnings/Dividends;PriceVolatility Highpredictability/Lowvolatility
Moderatepredictability/volatility Lowpredictability/Highvolatility

TotalExpectedReturnMatrix
Rating
Buy Accumulate Hold Sell Neutral NotRated
PleaseNote RecommendationswithNeutralRatingimplyreversalofourearlieropinion(i.e.BookProfits/Losses). ** Indicates that the stock is illiquid With a view to combat the higher acquisition cost for illiquid stocks, we haveenhancedourreturncriteriaforsuchstocksbyfivepercentagepoints. StockReviewReports:TheseareSoftcoveragesoncompanieswhereManagementaccessisdifficultorMarket capitalizationisbelowRs.2000mn.Viewsandrecommendationonsuchcompaniesmaynotnecessarilybebased onmanagementmeetingbutmaybebasedonthepubliclyavailableinformationand/orattendingCompanyAGMs. HenceStockReviewsmaybejustonetimecoverageswithanoccasionalUpdate,whereverpossible. Additionalinformationwithrespecttoanysecuritiesreferredtohereinwillbeavailableuponrequest. ThisreportispreparedfortheexclusiveuseofSushilGroupclientsonlyandshouldnotbereproduced,recirculated, publishedinanymedia,websiteorotherwise,inanyformormanner,inpartorasawhole,withouttheexpress consent in writing of Sushil Financial Services Private Limited. Any unauthorized use, disclosure or public disseminationofinformationcontainedhereinisprohibited.Thisreportistobeusedonlybytheoriginalrecipientto whomitissent.

LowRisk
Over15% 10%to15% 0%to10% NegativeReturns NotApplicable NotApplicable

MediumRisk
Over20% 15%to20% 0%to15% NegativeReturns NotApplicable NotApplicable

HighRisk
Over25% 20%to25% 0%to20% NegativeReturns NotApplicable NotApplicable

Thisisforprivatecirculationonlyandthesaiddocumentdoesnotconstituteanoffertobuyorsellanysecurities mentioned herein. While utmost care has been taken in preparing the above, we claim no responsibility for its accuracy.Weshallnotbeliableforanydirectorindirectlossesarisingfromtheusethereofandtheinvestorsare requestedtousetheinformationcontainedhereinattheirownrisk.

Thisreporthasbeenpreparedforinformationpurposesonlyandisnotasolicitation,oranoffer,tobuyorsellany security.Itdoesnotpurporttobeacompletedescriptionofthesecurities,marketsordevelopmentsreferredtoin thematerial.Theinformation,onwhichthereportisbased,hasbeenobtainedfromsources,whichwebelievetobe reliable, but we have not independently verified such information and we do not guarantee that it is accurate or complete.Allexpressionsofopinionaresubjecttochangewithoutnotice.

Sushil Financial Services Private Limited and its connected companies, and their respective directors, officers and employees(tobecollectivelyknownasSFSPL),may,fromtimetotime,havealongorshortpositioninthesecurities mentioned and may sell or buy such securities. SFSPL may act upon or make use of information contained herein priortothepublicationthereof.

February24,2012

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