EIL reported a decent revenue growth of 7.5% YoY, reaching Rs8.6bn. However, adjusted EBITDA margins contracted by 367bps YoY to 9.7%. The order inflow for FY23 stood at Rs47bn, with management targeting a similar range of order inflows (~Rs45-50bn) for FY24, supported by a robust order pipeline from notable projects such as IOCL-Petrochemical facility in Gujarat, BORL-Refinery expansion, and private sector initiatives like Crude to Chemicals and Polymer projects. EIL is also expanding into new verticals like Hydrogen and Biofuel while strengthening its market presence in exports to the Middle East, Africa, and South America.
EIL’s long-term growth prospects remain intact with a healthy order book, a strong project pipeline, diversification into newer verticals, and a lean balance sheet. Analysts project a Revenue/PAT CAGR of 12.9%/25.5% from FY23 to FY25E. The stock is trading at a PE ratio of 14.7x/11.4x for FY24/25E. Looking ahead, analysts downgrade the stock to ‘Accumulate’ from ‘BUY’ with a revised target price of Rs 116 (previously Rs 85), valuing it at a PE ratio of 12x FY25E.
The turnkey segment significantly drove revenue growth, with standalone sales reaching Rs8.6bn, mainly due to a 15.9% YoY increase in turnkey projects. The consultancy segment, however, experienced a decline of approximately 2% YoY. The gross margin declined to 44.4% in Q4FY23, compared to 47.8% in Q4FY22, attributed to the business mix. During the quarter, EIL reported a write-back of contractual obligations worth Rs 787.8mn related to a settlement with a client in the consultancy segment.
EIL’s order book remains healthy at Rs 76.9bn, with Q4FY23 order inflows of Rs39bn, driven by strong wins in the turnkey segment. Noteworthy orders include the execution of Residual Utilities and Offsites (RUO) for Rajasthan Refinery Limited (RRP) and the BS-VI Auto Fuels Projects at CPCL, Manali Refinery. The order book stands at 2.3 times the FY23 revenue, providing a solid foundation for future growth.