Engineering services market size is should grow from US$1.60 trillion in 2023 to US$1.96 trillion by 2028, which means that the industry should be able to compound at ~4.2% between 2023-2028. Infrastructure demand should be considered as a significant driver of Engineering services industry because this creates need for specialized skills and promotes innovation. One top engineering company is expected to capitalise on significant opportunities provided by this industry.

Infrastructure projects tend to be often vast and complicated, which encourages the need for engineering service providers to design and plan such projects, thereby, offering value-added services to customers. Furthermore, requirement of infrastructure continues to push innovation in engineering services sector as suppliers develop new and more efficient methods of designing and creating infrastructure. Use of digital technologies including AI, IoT, and cloud computing should support growth this top engineering company and should help it in outpacing growth of entire market. Such technologies are utilised to collect, process, and analyze significant data volumes in real-time to make informed decisions. Experts believe that architectural design and engineering services should get transformed by new technologies.

Engineering services market growth is not evenly distributed throughout regions. The US, China, Germany, the UK are considered as largest country markets for engineering services. However, several smaller countries, including India, should see much higher growth in comparison to such giants in upcoming few years. 

Therefore, stock experts are quite optimistic about growth opportunities present in front of this top engineering company which has received a new order. 

Jost’s Engineering Company Ltd

Incorporated in year 1907, the company has its headquarters in Mumbai with pan-India presence. Josts MHD focuses on providing innovative material handling solutions for customers’ internal material handling needs for the improvement in their processes’ efficiency. Engineered Products Division (EPD) is related with world leaders in different high technology application areas including sound and vibration, environmental simulation, etc. 

In FY23, the company saw strong growth across its operations and it expanded its range of services significantly. As the economy focuses on growing at sustained pace, it continues to see healthy private sector growth kicking in together with government sector capex. 

During FY23, Material Handling Division revenue went up by 32% on year-over-year basis. This growth was primarily due to higher demand and government initiative for Make in India movement. PBT went up by ~59% in comparison to last year as a result of cost optimization and an increase in volume.

EPD’s revenue saw an increase of 57% in FY23. The company’s expected orders were on time as a result of proper movement. Delivery of imported materials was delayed due to global supply chain disruption due to COVID-19 pandemic. As a result of this supply chain disruption, the company’s margins were impacted and fell from 21% to 16% during FY23. 

Indian Railways undertook numerous railway station redevelopment projects throughout India and Rail Land Development Authority (RLDA) has been assigned the responsibility to upgrade and modernise some of the renowned railway stations across India. Indian government continues to target to transform India into global sporting powerhouse through undertaking mega-sports infrastructure projects that should have long-term impact on health, education and tourism. Government of India proposed a sports budget of INR3,397 crore for FY24, exhibiting an increase of 11% in comparison to previous year’s budget. Health sector saw significant attention from Indian government post COVID-19 pandemic. Both Central and State Governments continue to focus on developing new hospitals and allied medical services such as medical colleges on significant scale. The company is seeing strong investments from private players in healthcare sector.

The company is optimistic strong revival of entire aviation industry. With a range of major international airports under construction throughout India, handling capacity throughout airports should increase significantly over upcoming 2-3 years. Further investments are expected in 2H of FY24 by Indian Government and private players to further support facilities and infrastructure of airports. 

Josts’ Engineering Product division has strong presence in both private and government sectors. Creation of capacity in sectors including infrastructure, power, mining, oil & gas, refinery, steel, etc. will certainly benefit this division. 

The company and its joint venture partner has received a letter of intent (or LOI) from Rajasthan Rajya Vidyut Prasaran Nigam Limited regarding 3 projects which are expected to be completed within 24 months from LOI. The details are as follows:

• Order No – 1: Total project cost of INR 108.14 crores (including GST) regarding “Construction of various 220kV and 132kV Transmission Lines in Rajasthan at Sawai-Madhopur, Baran, Dausa & Jaipur Districts Including Survey, supply of all equipment’s/ materials, erection (which includes civil works), testing and commissioning”. The company’s share in the total project cost is INR40.24 Crores (including GST).
• Order No- 2: Total project cost of INR111.92 crores (including GST) regarding “Construction of several 220 KV and 132 KV Transmission lines in Rajasthan at Dholpur, Bharatpur & Alwar Districts which includes survey, supply of all equipment’s/ materials, erection (that includes civil works), testing and commissioning”. The company’s share in total project cost is INR43.20 crores (including GST).
• Order No- 3: Total project cost of INR142.90 crores (including GST) regarding “Construction of several transmission elements 220 & 132 kV associated lines at 220 kV GSS Chain Pura Chhota (Tehsil-Rajgarh (Distt Churu) which includes survey, supply of all equipment’s/materials, erection (including civil works), testing and commissioning”. The company’s share in total project cost is INR57.25 crores (including GST). 

Conclusion

This top engineering company compounded its profit of ~33.8% over previous 5 years and its working capital requirements declined from 55.1 days to 39.6 days. On Tuesday, shares of this top engineering company saw an increase of 8.62% to make new 52-week high of INR475 per share from previous closing of INR437.30.

The company has market cap of more than INR200 crore and it gave multibagger returns of ~125% in just 1 year, ~300%+ in 3 years and more than ~800% in one decade. Given its market size and favourable industry dynamics, investors can consider this stock. 

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