Buy Swaraj Engines; target of Rs 2570: ICICI Direct

ICICI Direct's research report on Swaraj Engines

The Indian Meteorological Department (IMD) has upgraded its rainfall forecast for the upcoming monsoon season 2017 to 98% of LPA vs. the earlier forecast of 96% of LPA. Moreover, the geographical distribution is expected to be spatially well distributed with rainfall at 96% of LPA over North West India, 100% of LPA over Central India, 99% of LPA over South Peninsula and 96% of LPA over North East India.

Outlook

We expect SEL to clock engine sales volume CAGR of 16% over FY17-19E to 110682 units in FY19E. We expect sales and PAT to grow at a CAGR of 17% and 20%, respectively, in FY17-19E. We value SEL at Rs 2570 i.e. 32x P/E on FY19E EPS of Rs 80.2 and assign a BUY rating on the stock.