Had you bought Engineers India (EIL) at the point of maximum pessimism when the stock hit a low of Rs.147 in February earlier this year, you would have made a 90% return in six months as the stock is now quoting at Rs.270.
In February, there was a lot of apprehension in the crude oil and hydrocarbon market where EIL operates. As the crude price had crashed, there was a fear of cancellation of orders, spike in debtors, possible price negotiations in the existing projects along with pressure on operating margins and lack of fresh orders.
But so far, nothing of that sort has come through. In Q1FY17, the company posted a 20% growth in consulting revenue, which contributes 80% of top-line. Its other segment, turnkey projects, continues to slide and reported an EBIT margin of 2.8%. In the past the project business margins have remained in the range of 20-25%, but over the past 4-5 quarters they have fallen to negative or single