Escorts delivered strong Q1FY17 performance with its operating margin coming way above our as well as street's estimates. Its EBIDTA margins increased by 236 bps YoY and 353 bps QoQ to 8.3% as against our estimate of 7%, benefitted by lower RM cost and control on other expenses. Its Revenues/EBIDTA/Adj PAT increased 9.4%/52.4%/46.2% YoY and 30.7%/126.2%/69.7% QoQ to Rs10.5bn/Rs878mn/Rs514mn vis--vis our estimate of Rs10.7bn/Rs749mn/Rs524mn in Q1FY17. Its tractor volume grew by 10%YoY and 38.4% QoQ, while construction equipments' volume grew 45.5% YoY and 0.3% QoQ in the quarter. It has booked extra ordinary expense of Rs 63mn towards VRS expenses. Healthy tractor volume, cost cutting initiatives and strong performance of railway equipment segment are the key reasons behind margin expansion and healthy bottom line. Lower non operating income and higher tax rate restricted growth in bottom line to some extent.