Parag Parikh Financial Advisory Services (PPFAS) has recommended hold rating on Swaraj Engines (SEL) , in its October 21, 2011 research report.
“Swaraj Engines (SEL) reported an average set of numbers for the quarter and half year ended September 2011. Rising raw material costs and subdued pricing power with its sole customer Punjab Tractors Limited (PTL) is affecting the company's operating performance. This has resulted in lower operating as well as profit margins on a Y-Y basis. Total income for Q212 reported a rise of 19% Y-Y growth to Rs 1,029Mn as against Rs 862Mn for Q211 (7% Q-Q degrowth). For the first half year ended FY12, SEL posted a 17% Y-Y revenue growth of Rs 2,131Mn as compared to Rs 1,711Mn for the corresponding period of the previous year. During the quarter, SEL's despatches to M&M's Swaraj Division totaled to 12,839 engines compared to 11,452 engines in the corresponding quarter of last year, translating to a 12% Y-Y growth. Realization/unit for the quarter ended Sep'11 was Rs 80,139/- per unit (Rs 75,271/- per unit; Sep'10), a growth of 6.5% Y-Y. In terms of expenses as a % of sales, raw material cost for Sep'11 increased by 252bps to 77.6% from 75.1% in Sep'10. On the other hand, personnel cost reduced by 43bps. Rising RM prices have pulled down the operating margins for the quarter by 258bps to 14.8% from 17.4% in the corresponding quarter of last year. Effective tax rate for Q212 was at 30.8% v/s 31.5% for Q210. Net profit for the current quarter reported a subdued growth of 9% Y-Y to Rs 118Mn as compared to Rs 108Mn for Sep'10 (13% Q-Q de-growth).”
“Going ahead, SEL's margins would be under pressure due to rising raw material prices, but on the upside we believe volume growth will pick up, with increased demand coming from M&M's Swaraj Division. Furthermore, the company's phased capacity expansion programme totaling to 75,000 engines per annum is on course and is expected to be completed in the last quarter of the current fiscal. After taking into effect the quarter and half year ended reported numbers, we have marginally changed our sales and earnings growth. At the CMP of Rs 468.0/-, (FY12E cash per share = Rs 131/-) the scrip is trading at 11.7x FY12E EPS of Rs 40/- We maintain our HOLD call on the scrip,” says Parag Parikh Financial Advisory Services research report.
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“Swaraj Engines (SEL) reported an average set of numbers for the quarter and half year ended September 2011. Rising raw material costs and subdued pricing power with its sole customer Punjab Tractors Limited (PTL) is affecting the company's operating performance. This has resulted in lower operating as well as profit margins on a Y-Y basis. Total income for Q212 reported a rise of 19% Y-Y growth to Rs 1,029Mn as against Rs 862Mn for Q211 (7% Q-Q degrowth). For the first half year ended FY12, SEL posted a 17% Y-Y revenue growth of Rs 2,131Mn as compared to Rs 1,711Mn for the corresponding period of the previous year. During the quarter, SEL's despatches to M&M's Swaraj Division totaled to 12,839 engines compared to 11,452 engines in the corresponding quarter of last year, translating to a 12% Y-Y growth. Realization/unit for the quarter ended Sep'11 was Rs 80,139/- per unit (Rs 75,271/- per unit; Sep'10), a growth of 6.5% Y-Y. In terms of expenses as a % of sales, raw material cost for Sep'11 increased by 252bps to 77.6% from 75.1% in Sep'10. On the other hand, personnel cost reduced by 43bps. Rising RM prices have pulled down the operating margins for the quarter by 258bps to 14.8% from 17.4% in the corresponding quarter of last year. Effective tax rate for Q212 was at 30.8% v/s 31.5% for Q210. Net profit for the current quarter reported a subdued growth of 9% Y-Y to Rs 118Mn as compared to Rs 108Mn for Sep'10 (13% Q-Q de-growth).”
“Going ahead, SEL's margins would be under pressure due to rising raw material prices, but on the upside we believe volume growth will pick up, with increased demand coming from M&M's Swaraj Division. Furthermore, the company's phased capacity expansion programme totaling to 75,000 engines per annum is on course and is expected to be completed in the last quarter of the current fiscal. After taking into effect the quarter and half year ended reported numbers, we have marginally changed our sales and earnings growth. At the CMP of Rs 468.0/-, (FY12E cash per share = Rs 131/-) the scrip is trading at 11.7x FY12E EPS of Rs 40/- We maintain our HOLD call on the scrip,” says Parag Parikh Financial Advisory Services research report.
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