ICICI Direct has given Buy recommendation for Swaraj Engines with a target price of Rs. 1650 in its research report issued on Apr 21, 2021

ICICI Direct’s research report on Swaraj Engines

Swaraj Engines (SEL) reported a robust performance in Q4FY21, primarily tracking healthy wholesale tractors volume and likely inventory restocking at its key client M&M. Engine sales volume for Q4FY21 came in at 33,831 units, up 62% YoY, 8% QoQ. Sales volume for FY21 came in at an all-time high of 113,269 units, up 26% YoY amid ~20% volume growth in the tractor segment for FY21. Net sales in Q4FY21 were at Rs 305 crore with EBITDA at Rs 46.2 crore and corresponding EBITDA margins at 15.1%, up 170 bps QoQ. Margins for the quarter were supported by improvement in gross margins as well as operating leverage benefits. PAT in Q4FY21 was at Rs 32.6 crore, up 106% YoY, 30% QoQ. SEL announced a total dividend of Rs 69/share for FY21, implying dividend payout of ~90%, with EPS for FY21 at Rs 76.2/share.


We maintain our positive stance on SEL amid a highly capital efficient business model, robust cash flow generation and overall positive farm sentiments domestically. Building in ~13/10% sales/PAT CAGR in FY21-23E we retain BUY valuing it at Rs 1650 i.e. 18x P/E on FY23E (earlier TP Rs 1710).