We recommend Swaraj Engines Ltd (SEL) a “STRONG BUY”. Swaraj Engines was earlier a part of JV between Punjab Tractors Ltd (PTL) and Kirloskar Engines to manufacture engines for Punjab Tractors. PTL had been taken over and merged with Mahindra and Mahindra Ltd. As a result, M&M now holds ~33% of SEL’s equity with ~17% is held by Kirloskar Industries Ltd. SEL supplies engines from 20HP to 50HP to “Swaraj” branded tractors of M&M. SEL also, manufactures engine components for the erstwhile Swaraj Maza Ltd i.e. SML Isuzu. The strong volume growth which is likely to be seen in FY16e from its capacity expansion to ~1,05,000 engines p.a., increased demand from M&M, over capacity utilization in FY15e to enhance margins, presence in all HP segments, softening of commodity prices and dependence on agriculture industry bodes well for the SEL’s fortune. Therefore, we have revised our target price to INR1164 per share from our earlier TP of INR1062 per share given in Q1FY15 result update report.