Swaraj Engines Ltd. share price target

Maintain BUY with a TP of Rs 2,027 (21x Sept-20E EPS). Swaraj Engines Ltd (SEL) delivered strong performance in 2Q. Revenue jumped by 18.4% at Rs 2.47bn led by 14.3% increase in Engine volumes (28.56k units )and 3.6% at net ASP. EBITDA rose by 14.4% YoY to Rs 401mn with margin at 16.2% (-56bps YoY/+63bps), hit by 40bps drop in gross margin, partially offset by operating leverage. APAT grew by 8% YoY to Rs 254mn impacted by lower other income (-24% YoY).

Monsoon 2018 ended the season with rainfall deficiency at ~9% of LPA pan India. It lagged the monthly numbers with each month witnessing rainfall deficiency. In terms of spatial distribution, it was normal in the southern (98% of LPA) as well as north west belt (98% of LPA) while it was near normal in Central India (93% of LPA) and deficient in eastern India (76% of LPA). In terms of coverage, it was normal to positive in 69% of geographical area while deficient in 31% of area. However, on the flip side, water level at key reservoirs is ahead of last year (4% higher). while...

Maintain BUY with a TP of Rs 2,476 (27x FY20E EPS). Swaraj Engines Ltd (SEL) 1Q results were largely in line estimates. Revenue at Rs 2.34bn (+21% YoY) driven by 15% increase in Engine volumes (26.72k) and 5% at net ASP. EBITDA rose by 14% YoY to Rs 366mn with margin at 15.6% (-103bps YoY/+20bps QoQ), hit by 166bps drop in gross margin, partially offset by operating leverage.

ICICI Securities Ltd | Retail Equity Research Swaraj Engines (SEL) reported a steady Q1FY19 performance with engine sales volume coming in at 26,742 units, up 14.8% YoY This lags the tractor volume growth of ~19% at its parent in the corresponding period, signalling some loss of market share by Swaraj brand of tractors in the domestic market Consequent sales in Q1FY19 were at | 264.5 crore, up 20.9% YoY EBITDA in Q1FY19 was at | 36.6 crore with corresponding EBITDA...

Swaraj Engines Ltds (SEL) Q4FY18 numbers were more or less in-line with our estimates with net revenue and PAT growth of 15.2% & 17% YoY respectively. An expansion of 49bps in EBITDA margins (at 15.4%) was encouraging, led by relatively lower growth in operating expenses and material cost.

We recommend BUY with a TP of Rs 2,476 (27x FY20E EPS). Swaraj Engines Ltd (SEL) reported strong 4QFY18 revenues at Rs 1.85bn (+15.2% YoY). Engine volumes for the quarter came in at 21,780 units (+9.8% YoY) while realization improved to Rs 85,060 (+5.0% YoY). EBITDA for 4QFY18 grew by 18.4% YoY to Rs 285mn and EBITDA margin stood at 15.4% (+41bps YoY). Margin improvement was driven by ~19bps improvement in each, gross margins and employee expenses.

Despite a strong growth in the India tractor industry, Swaraj Engines (SWE) reported a moderate volume growth. Considering stellar growth reported by M&M;'s tractor division, this performance was below our estimates. 4QFY18 EBITDA/PAT improved 19.0%/17.0% YoY, on the back of 9.8% growth in volumes and 49 bps YoY expansion in EBITDA margin. SWE's EBITDA and PAT were below our expectations on account of a slower than expected volume growth, affecting the topline. We acknowledge that SWE is poised to leverage the continued good growth momentum in tractor industry, with higher return ratios. Considering growth momentum in tractor industry, we maintain our Buy rating on the...

ICICI Securities Ltd | Retail Equity Research Swaraj Engines (SEL) reported a muted Q4FY18 performance despite robust tractor sales volumes at the industry as well as parent level This can be attributed to normalisation of inventory at the parent level in FY18. From a two-year perspective, Swaraj has grown in tandem with industry growth rate with market share intact at ~17% SEL recorded engine sales of 21,780 units in Q4FY18, up 9.8% YoY Consequently, total operating income in Q4FY18 came in at | 185.2...

Skymet, a private weather forecasting agency, expects the upcoming monsoon 2018 to be normal at 100% of LPA with a +/- 5% model error. On a month wise distribution, they expect June to be 111% of LPA, July at 97% of LPA, August at 96% of LPA and September at 101% of LPA. The most encouraging part of the prediction was the 80% probability of a normal to above normal monsoon and no chance of a drought like scenario. This is likely to result in robust farm production and consequent increase in farm income, boosting rural demand, thereby benefiting all...

Our fair value for the stock is Rs 2,468 (27x FY20E EPS). Swaraj Engines Ltd (SEL) is a cash rich, high RoCE business, co-owned by M&M; and Kirloskar Industries. It is mid-way into a sizeable (but cheap) capex cycle, with high visibility of volume growth.