Engineers India EBITDA dropped on 25.8% and Revenue dropped on 12.4%

25-05-2016 • About Engineers India ($ENGINERSIN) • By InTwits

Engineers India reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Engineers India is a company in decline: FY2016 revenue growth was -12.4%, 5 years revenue CAGR was -11.7%
EBITDA Margin is declining: 11.4% in FY2016 vs. 13.5% in FY2015 vs. 19.4% in FY2012
Engineers India has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.0%. At the same time it's in pair with industry average of 3.9%
CAPEX is quite volatile: ₹594m in FY2016, ₹632m in FY2015, ₹820m in FY2014, ₹799m in FY2013, ₹0m in FY2012
The company has potentially unprofitable business model: ROIC is 5.9%

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Engineers India's Revenue dropped on 12.4%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 2.1 pp from 13.5% to 11.4% in FY2016. During the last 5 years EBITDA Margin topped in FY2013 at 23.6% and was declining since that time.

Net Income margin decreased slightly on 0.81 pp from 18.0% to 17.1% in FY2016. During the last 5 years Net Income margin topped in FY2014 at 26.1% and was declining since that time.

Investments (CAPEX, working capital and M&A)

In FY2016 Engineers India had CAPEX/Revenue of 3.9%. CAPEX/Revenue increased slightly on 0.73 pp from 3.2% in FY2013 to 3.9% in FY2016. It's average level of CAPEX/Revenue for the last three years was 4.0%.

Return on investment

The company operates at low ROIC (5.9%) and ROE (9.8%). ROIC decreased on 2.6 pp from 8.5% to 5.9% in FY2016. ROE decreased on 2.4 pp from 12.1% to 9.8% in FY2016. ROIC stuck to a declining trend at -9.5 pp per annum in the last 5 years. ROE followed a declining trend at -7.5 pp per annum in FY2012-FY2016.

Leverage (Debt)

Debt level is -15.0x Net Debt / EBITDA and 0.0x Debt / EBITDA. Debt dropped on 39.5% while cash jumped on 17,176%.

Engineers India has no short term refinancing risk: cash is higher than short term debt (864,046.3%).

Valuation and dividends

Engineers India's trades at EV/EBITDA 19.5x and P/E 23.0x while industy averages are 17.8x and 21.9x. The company's EV/(EBITDA-CAPEX) is 29.6x with the industry average at 22.8x.

Management team

The company's CFO Ram Singh has spent 10 years with the company.

Financial and operational results

Engineers India ($ENGINERSIN) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	37,234	25,290	18,465	17,412	15,250	-12.4%
EBITDA	7,222	5,980	3,889	2,347	1,742	-25.8%
Net Income	6,439	6,322	4,827	3,127	2,615	-16.4%
Balance Sheet
Cash	175	198	160	151	26,129	17,176.5%
Short Term Debt	0	0	2	5	3	-39.5%
Long Term Debt	0	0	0	0	0
Cash flow
Capex	0	799	820	632	594	-6.1%
Ratios
Revenue growth	30.7%	-32.1%	-27.0%	-5.7%	-12.4%
EBITDA growth	8.7%	-17.2%	-35.0%	-39.6%	-25.8%

EBITDA Margin	19.4%	23.6%	21.1%	13.5%	11.4%	-2.1%
Net Income Margin	17.3%	25.0%	26.1%	18.0%	17.1%	-0.8%
CAPEX, % of revenue	0.0%	3.2%	4.4%	3.6%	3.9%	0.3%

ROIC	44.2%	26.8%	14.4%	8.5%	5.9%	-2.6%
ROE	38.0%	30.1%	20.0%	12.1%	9.8%	-2.4%
Net Debt/EBITDA	-0.0x	-0.0x	-0.0x	-0.1x	-15.0x	-14.9x

Peers in Consulting Services

Below you can find Engineers India benchmarking vs. other companies in Consulting Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Veritas (India) ($VERITAS)	-	15.7%	31.5%	25.0%	-3.1%
Median (1 company)	-	15.7%	31.5%	25.0%	-3.1%
Engineers India ($ENGINERSIN)	-	-32.1%	-27.0%	-5.7%	-12.4%

Top companies by EBITDA margin, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Artefact Projects ($ARTEFACT)	-	-	-	13.4%	-
Veritas (India) ($VERITAS)	2.1%	2.9%	3.3%	3.8%	-
Median (2 companies)	2.1%	2.9%	3.3%	8.6%	-
Engineers India ($ENGINERSIN)	19.4%	23.6%	21.1%	13.5%	11.4%

Top companies by CAPEX/Revenue, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Veritas (India) ($VERITAS)	0.5%	-	-	0.0%	-
Median (1 company)	0.5%	-	-	0.0%	-
Engineers India ($ENGINERSIN)	0.0%	3.2%	4.4%	3.6%	3.9%

Top companies by ROIC, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Veritas (India) ($VERITAS)	10.4%	11.9%	12.9%	7.2%	-
Artefact Projects ($ARTEFACT)	-	-	-	-	-
Median (2 companies)	10.4%	11.9%	12.9%	7.2%	-
Engineers India ($ENGINERSIN)	44.2%	26.8%	14.4%	8.5%	5.9%

Top companies by Net Debt / EBITDA


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Veritas (India) ($VERITAS)	2.0x	3.8x	3.2x	3.4x	-
Artefact Projects ($ARTEFACT)	0.0x	3.6x	-	0.0x	-
Median (2 companies)	1.0x	3.7x	3.2x	1.7x	-
Engineers India ($ENGINERSIN)	-0.0x	-0.0x	-0.0x	-0.1x	-15.0x

Engineers India stock price chart

Engineers India financials

mln.	FY2010	FY2011	FY2012

Revenue	21,243	28,482	37,234
EBITDA	5,057	6,645	7,222
Net income	4,405	5,313	6,439
CAPEX	217.0	0.000	0.000
Debt	0.000	0.000	0.000
Cash	1,250	695.8	175.5

About Engineers India

Engineers India Limited, an engineering consultancy company, provides design, engineering, procurement, construction, and integrated project management services principally for oil and gas, and petrochemical industries in India. The company operates in two segments, Consultancy and Engineering Services, and Turnkey Projects. It offers project management services, including developing project execution plans, detailed schedules, cost forecasts/controls, progress tracking and reporting, and the integration of design, engineering, procurement, logistics, and construction efforts; and develops process technologies for petroleum refining, oil and gas processing, and aromatics industries. The company also provides procurement services, such as contracts and purchase, inspection, expediting, transportation, and supplier/contractor enlistment. In addition, it offers construction services comprising pre-construction activities, including bid management process, plot plan review/heavy lift study, etc; and construction activities consisting of site construction management, liaison with statutory authorities, construction quality and warehouse management, contracts administration, pre commissioning and commissioning assistance, and contract closing. Further, company provides specialist services comprising heat and mass transfer equipment design, environment engineering, specialist materials and maintenance, and plant operations and safety services. Additionally, it offers technical services for projects in oil and gas and other industrial sectors; services related to certification, re-certification, safety audit, and HSE management systems for offshore and onshore oil and gas facilities; and third party inspection for equipment and installations in hydrocarbon and other sectors. The company also serves infrastructure, water and waste management, solar and nuclear power, and fertilizer sectors. Engineers India Limited was founded in 1965 and is headquartered in New Delhi, India.