Swaraj Engines posted net sales of 358 crores for fy 11 as compared to 282 cr for fy 10.
Net profit was at 44 crores for fy 11 against 37.4 cr for fy 10.
EPS for fy 11 was at 35.4 for fy 11 as compared to 30.1 per share for fy 10.
What is interesting here is that the company had approved expansion of capacity to 60,000 engines pa back in oct 10. Now in march 11 results press release it has stated that the capacity will be further expanded to 75000 engines per annum to support demand from its key client Mahindra & Mahindra – Swaraj division. All the capex is to be met through internal accruals.
This is likely to propel the company into a higher growth orbit and I expect the Return Ratios to improve further because the cash sitting on the balance sheet was not generating adequate returns whereas once it is deployed in expansion it will generate much higher returns.
Risk remains of dependency on only one client and sector that is M&M and tractor segment respectively. But looking at the buoyancy in the demand for tractors it seems likely that the company is likely to achieve high capacity utilisation even with enhanced capacity.
At around 450-460 the stock seems to be an interesting proxy play in the agri space.