Swaraj Engines – Stock Research – Update

Swaraj Engines

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)JuneApr-Jun
FY13FY12%YoYFY13FY12%YoY
Domestic22493215524%5656157244-1%
Exports127211788%302029084%
Total Tractors23765227305%5958160152-1%

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!

 

Click here to see communication to investors on the M&M website.

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