Engineers India is a blue chip navratna PSU stock.
It has a dividend yield of 3.5%.
According to a research report by SMIFS, Engineers India will benefit from the Rs. 1 lakh crore Capex planned by PSU OMCs.
The report is as follows:
PSU Giants to pump around INR1 lac crore for Capex plans; Engineers India to get benefitted
Indian Oil earmarks INR 22,000-crore capex for FY19:
Indian Oil has lined up INR 22,000-crore capex plan for the current fiscal year and has also got the shareholder approval to raise around INR 20,000 Cr. through an NCD issue this year. Around INR6,000 Cr will be towards upgrading refineries to meet BS-VI emission norms. INR 4,000-crore, for the 1,170-km-long pipeline linking its Ennore-Manali LNP terminal. Around INR3,000 Cr into new businesses like biofuels, and INR1,000 Cr into Paradeep petrochemicals expansion and INR 500 crore expansion of Ethanol plant in Panipat.
HPCL to invest INR75000 crore to expand refining capacity, pipelines, LNG terminal:
While HPCL has plans to invest massive INR75000 crore over five years across its business segments to grow and expand its Visakhapatnam refinery in Andhra Pradesh for enhancing the capacity from the present 8.33 mmtpa to 15 mmtpa at a cost of INR20928 crore. The project includes bottom upgradation facilities and will make the refinery capable of producing Bharat Stage VI (BSVI) compliant motor fuels and enhance its complexity and profitability. The company’s Mumbai refinery is being expanded from 7.5 mmtpa to 9.5 mmtpa at the cost of INR5060 crore. It is also setting up a 9 mmtpa greenfield refinery in Barmer, Rajasthan, and is a partner in the 60 mmtpa Ratnagiri Refinery and Petrochemicals Ltd in Maharashtra.
Considering the huge capex plans for upcoming two years, we believe Engineers India Ltd (EIL) will be greatly benefitted. The company’s order book stands at INR7229 cr as on Jun’18 down by 6% YoY. However, we believe the huge capex plans by Oil PSU’s to boost order inflow of EIL for the next two years. The company is currently trading at attractive valuation of 19.95x 1 yr Fwd PE and 38% discount from 52 week high of INR206. Also since the company is a zero-debt company and has 14% revenues from export, it is safeguarded from current scenario of rising interest rate and to benefit from Rupee depreciation.
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