Swaraj Engines touched its 52-week high on Wednesday on improving outlook for the tractor sector. The stock rose by as much as 7% during the day to touch a yearly high of Rs 592. At present, it is trading up 6.8% at Rs 590.
Sector analysts said that the surprise improvement in tractor volumes had helped the company post good corporate earnings numbers. The Punjab-based engine-maker reported a 22.5% rise in net profits for the quarter ended September 2013.
“At the beginning of FY-14, the expectation was that the tractor industry would see less than 10% growth through the year. However, the industry growth has beaten expectations so far and grown by 20%,” said Mitul Shah, auto analyst with Karvy Stock Broking.
The company supplies engines to the Swaraj Division of Mahindra&Mahindra (MNM), which has seen the share of its tractors in the product mix to 33% mix at the end of the September quarter. Last year during the same quarter, the share of tractor for MNM in the product mix stood at 26%. MNM currently holds 33.2% stake in Swaraj Engines.
However, not all analysts have coverage of this stock as its counter is known to be highly illiquid. The stock has been seeing some activity in the last three-four months on the back of the pick-up in the tractor business.
“We do not have a view on the company because of the illiquidity in the stock. The stock has moved up sharply in the last few months and we feel that valuations are not justified,” said an analyst with an Indian brokerage.
Some sections of the market, however, believe that the stock could see further upsides of about 10% more as the company is likely to see good margins in the quarters ahead.
