Company Update - Swaraj Engines - ICICI Securities

Swaraj Engines (SEL) reported a subdued set of Q1FY21 numbers. Net revenues for the quarter were down 43% YoY Rs. 117 crore, tracking a 40% decline in engine volumes to 13,756 units. ASPs for the period were to the tune of Rs. 85,047/unit, down 1.1% QoQ, 4.6% YoY. Margins fell 240 bps QoQ to 11% despite a 60 bps gross margin expansion as negative operating leverage played out. Consequent PAT for the quarter came in at Rs. 7.8 crore, down 54% YoY. Dividend for the year was at Rs. 40/share.

Valuation & Outlook

We expect sales, EBITDA, PAT to grow at a CAGR of 3.5%, 10.4%, 9%, respectively, in FY20-22E. SEL, through its large business share of M&M's tractor division, is an auxiliary play on the post Covid revival of the domestic rural economy. Demand visibility in times of sluggishness elsewhere, in our opinion, is set to lead to continuation of premium valuations commanded by the company. Its robust financials offer additional comfort. We value SEL at Rs. 1,740 i.e. 25x FY22E EPS and retain BUY on the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_SwarajEngines_CoUpdate_Jul20.pdf

Shares of SWARAJ ENGINES LTD. was last trading in BSE at Rs.1532.7 as compared to the previous close of Rs. 1512.55. The total number of shares traded during the day was 3262 in over 578 trades.

The stock hit an intraday high of Rs. 1536.9 and intraday low of 1447.55. The net turnover during the day was Rs. 4887537.

Source : Equity Bulls

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