East India Securitie's report on Swaraj Engines
Swaraj Engines (SWE) reported good volume growth as expected in Q2FY21, mirroring good show of overall tractor industry. Based on our recent survey, we believe Swaraj tractors continue to enjoy strong brand equity and set to grow with the industry. SWE reported revenues of Rs 2,923mn, a growth of 31.2% YoY (up ~150% QoQ), bang on our estimates. Volumes grew by 31.3% YoY to 34,489 units and realisation was more-or-less flat at Rs 84,746 per unit. Despite continued challenges on account of COVID-19, more so at suppliers' end with regard to production ramp up, the company could achieve full capacity utilization during the quarter.
We believe tractor segment would outperform in the auto industry with government focus on agriculture and construction activities. Considering the strong recovery in tractor sales, we maintain our Buy rating on the stock with target price to Rs 1,676 (22xFY22e EPS).
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