Swaraj Engines Ltd - First Cut
Rajesh Desai
Dear Sir,
Swaraj Engines Ltd announced its Q2FY14 results on 21st October, 2013.
The company posted impressive results with net sales of INR150.45 crore, which was up by 24.66% and 2.92% on YoY and QoQ basis due to company taking full advantage of recently completed capacity expansion. The demand from Mahindra & Mahindra also pushed the volumes on the higher side. The company had recently expanded its installed capacity to 75000 engines per annum from 60000 engines per annum to meet the strong demand coming from its largest client M&M. The growth in the topline helped the EBITDA to outperform by growing 21.50% and 2.49% on YoY and QoQ basis. However, the margins fell marginally by 17bps and 10bps on YoY basis and QoQ basis. The company posted net profit of INR17.17 crore, which was also up by 22.64% and 2.08% on YoY and QoQ basis.
Hence, the results arriving are justifying the triggers mentioned in our report dated 14th Feb’13 that Swaraj engines is poised to outperform due to capacity expansion which would improve volume growth in FY14e. Other factors like increased demand from M&M, its presence in all HP segments, softening of commodity prices and dependence on agriculture industry also bodes well for the SEL’s fortune. These factors are expected to help the company witness higher sales growth, with margin also improving as higher capacities get increasingly utilized.
At the CMP of INR495, the stock is trading at a P/E of 9.97x its TTM EPS of INR49.66 per share. Hence, at the current level, with a discounted P/E multiple of 10x on FY2014E EPS of INR54.10 (Microsec Estimate), we recommend a BUY to the stock with the target price of INR541.
Particulars | Actual |
Consensus |
Var (%) |
|
Net Sales |
150.45 |
148.60 |
1.24% |
|
EBITDA |
22.66 |
24.30 |
-6.75% |
|
PAT |
17.17 |
17.03 |
0.85% |
|
EPS |
13.82 |
15.31 |
-9.70% |
Swaraj Engines ltd Ltd Q2FY14 Standalone Results |
Half-Yearly Results | |||||||
|
Particulars |
Q2FY14A |
Q2FY13A |
Q1FY14A |
YoY |
QoQ |
H1FY14 |
H1FY13 |
Var |
|
Net Sales |
150.45 |
120.69 |
146.18 |
24.66% |
2.92% |
296.63 |
237.58 |
24.85% |
|
Other Operating Income |
1.13 |
1.07 |
0.98 |
|
|
2.34 |
2.34 |
|
|
Total Operating Income |
151.58 |
121.76 |
147.16 |
|
|
298.97 |
239.92 |
|
|
Total Expenditure |
128.92 |
103.11 |
125.05 |
|
|
253.97 |
203.24 |
|
|
EBITDA |
22.66 |
18.65 |
22.11 |
21.50% |
2.49% |
45.00 |
36.68 |
22.68% |
|
EBITDA Margin (%) |
14.95% |
15.32% |
15.02% |
(37)bps |
(7)bps |
15.05% |
15.29% |
(24)bps |
|
Other Income |
4.6 |
2.87 |
4.70 |
|
|
9.30 |
5.95 |
|
|
Operating Profit |
27.26 |
21.52 |
26.81 |
|
|
54.30 |
42.63 |
|
|
Depreciation |
2.22 |
1.40 |
2.12 |
|
|
4.34 |
2.80 |
|
|
PBIT |
25.04 |
20.12 |
24.69 |
|
|
49.96 |
39.83 |
|
|
Interest |
0.01 |
0.02 |
0.02 |
|
|
0.03 |
0.03 |
|
|
Exceptional Items |
0 |
0.00 |
0.00 |
|
|
0.00 |
0.00 |
|
|
PBT |
25.03 |
20.10 |
24.67 |
|
|
49.93 |
39.80 |
|
|
Tax |
7.86 |
6.10 |
7.85 |
|
|
15.71 |
12.10 |
|
|
PAT |
17.17 |
14.00 |
16.82 |
22.64% |
2.08% |
34.22 |
27.70 |
23.54% |
|
PAT Margin (%) |
11.33% |
11.50% |
11.43% |
(17)bps |
(10)bps |
11.45% |
11.55% |
(10)bps |
|
|
|
|
|
|
|
|
|
|
|
Equity Capital |
12.42 |
12.42 |
12.42 |
|
|
12.42 |
12.42 |
|
|
Face Value |
10 |
10 |
10 |
|
|
10.00 |
10.00 |
|
|
No. of Outstanding shares |
1.24 |
1.24 |
1.24 |
|
|
1.24 |
1.24 |
|
|
|
|
|
|
|
|
|
|
|
|
EPS |
13.82 |
11.27 |
13.54 |
22.64% |
2.08% |
27.55 |
22.30 |
23.54% |
|
Particulars |
Q2FY14A |
Q2FY13A |
Q1FY14A |
YoY |
QoQ |
HIFY14 |
H1FY13 |
Var |
|
Engines Sold |
18484 |
14389 |
17783 |
28.46% |
3.94% |
36267 |
28242 |
28.42% |
|
Sales Realization |
81395 |
83877 |
82202 |
-2.96% |
-0.98% |
81791 |
84123 |
-2.77% |
|
Source: Company Data, Microsec Research. All data in INR crores unless specified. | ||||||||
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
CA. Rajesh Desai