ICICI Direct recommended hold rating on Swaraj Engines with a target price of Rs 1450 in its research report dated October 30, 2018.
ICICI Direct's research report on Swaraj Engines
Swaraj Engines (SEL) reported a robust Q2FY19 performance Engine sales volume grew at a robust pace of 14.3% YoY to 28,560 units vs. 4.5% tractor de-growth witnessed at the parent company Consequent net sales in Q2FY19 was at Rs 247.0 crore (up 18.4% YoY) EBITDA in Q2FY19 came in at Rs 40.1 crore with corresponding EBITDA margins at 16.2%, down 60 bps YoY. Margins for the quarter were lower tracking higher raw material costs as well as other expenses partly compensated by lower employee costs PAT in Q2FY19 was at Rs 25.4 crore, up 8.0% YoY The robust Q2FY19 performance is against expectation. It largely seems to be an attempt by the parent to procure engines before the festive period, the trend of which should normalise over H2FY19.
We value SEL at Rs 1450 i.e. 18x P/E on FY20E EPS of Rs 80.4 with a HOLD rating on the stock.
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