A few days back I had written a detailed research note on Swaraj Engines Ltd. As expected the slowdown in tractors sales is a reality. Mahindra & Mahindra announced their results 2 days ago. They had a decent quarter with net profit up 26% year-on-year.
What’s of interest are the tractor sales figures as these have a direct impact on Swaraj Engines. Recall that Swaraj Engines gets almost all of its revenue by selling tractor engines to Swaraj division of M&M Farm Equipment business
M&M result comparison
|M&M Farm equipment sales (including Swaraj)||June||Apr-Jun|
Swaraj Engines growth expectation
Media reports say that management has given guidance for 0-2% growth in tractors, reduced from 5% earlier. They say that this is still better than other tractor manufacturers who are talking of sales decrease going ahead. But compare this against a compounded annual growth rate of more than 12% over FY05-FY12 for tractor sales in India and you will see that there is a slowdown.
As a result, the stock price for Swaraj Engines Ltd. might give a lower entry point opportunity in the coming months. Wait and watch!