Escorts Kubota Ltd. share price target

Escorts' topline stood at INR 1,089 crore in Q1FY21, in line with our estimates.

INR2.25-2.5b in FY21 for new product development and capacity We are upgrading our EPS estimates by 9%/7% for FY21/FY22E to reflect the improving outlook for tractor volumes, mix and cost savings. - Margin has improved due to lower commodity cost Improved product mix (>40hp tractors), as share of 40HP+ tractors has increased to 62% in 1QFY21 (v/s 45-46% YoY) v/s 57-58% in 4QFY20, Subdued discounts during the quarter, which is expected to remain subdued till the supply chain normalizes, and Other expenses being lower by INR300-350m due to (a) no SG&A; expenses in 45 days shutdown (had resulted in no cost on SG&A; of INR300-350m, and (b) no marketing spends, both of which will normalize in the coming It has aggressive plans to cut fixed cost by 10-15% in FY21. Our estimates are not yet factoring in any contribution We are upgrading our EPS estimates by 9%/7% for FY21/22E to reflect the improving outlook for tractor volumes, mix and cost savings.

Escorts has been among the leading players in the tractor industry and well-known brand in the farm equipment space since independence.

Escorts is a prominent tractor player domestically with market share in excess of 11%. The company's brand of tractors is particularly strong in the northern as well as the eastern belt of India. With rural India relatively less impacted due to Covid-19, record food-grain procurement by government agencies as well as expectation of normal monsoon 2020, we expect the tractor industry to outperform the larger automobile space in FY21E with Escorts a key beneficiary. Escorts in the recent past has also entered into a strategic partnership with Kubota Corporation of Japan (one of the global...

Q4FY20 revenue de-grew by -15%YoY largely on account of production lockdown and 20%YoY decline in tractor volume and 26%YoY in construction equipment sales. However softening metal price, localization, cost control initiative and superior product mix has expanded the margin to 245bps at 14.1%. Adj. PAT grew by 15.5%YoY supported by lower tax. The government's action towards improving the agricultural...

Background: Escorts Ltd (ESC) is one of India's prominent players in the Automotive / Tractor industry, with an overall market share of 11.2% in the domestic tractor industry. ESC is also present in construction and material handling equipment, such as cranes, compactors and forklifts with 55% market share in material handling segment. Revenues share by segment in 4QFY20: Agri machinery (77.0 %), Construction equipment (15.0%), and Railway equipment (8.0%). The company has collaborations with seven Technology giants- Microsoft, Reliance Jio, Trimble, Samvardhana...

Escorts reported better than expected results on the revenue front at Rs1380cr, ~15% decline y/y (v/s expectation of >20% decline). It reported a robust EBITDA margin of 14.1% (up ~250 bps) beating estimates of ~12%.

Tractor: Steady state market share, rural slate to limit decline The tractor industry has been at the forefront of farm mechanisation in India with total tractor sales pegged at 7.1 lakh units in FY20. Escorts is a prominent tractor player domestically with market share as of FY20 pegged at 11.6%, 130 bps in FY16-20. Given the rural centric tractor demand that is relatively less impacted by Covid-19, the domestic tractor industry is expected to outperform the rest of the automobile industry in FY20. The tractor industry is also likely to benefit from upbeat farm...

It expects to We are upgrading our EPS estimates by 3%/2% for FY21/22E as we tweak our volumes for tractors and growth for other businesses. Subsidy-based sales are expected to return in FY21 and could be higher than Kubota JV SOP is estimated by 3QFY21, it has been delayed due to the In 4QFY20, addressable Construction Equipment industry stood at -24% (v/s - 32.2% for Escorts with 50% sales decline in month of Mar20). Through this partnership, ESC gains access to (a) global product knowhow (in tractors and implements), (b) global distribution network, and (c) global supply chain (by We expect the railway business to deliver ~15% CAGR over FY20-22E, benefitting from the ramp-up in new products, whereas construction equipment revenues are estimated to be flat over FY20-22E. Our estimates are not yet factoring in any contribution from We are upgrading our EPS estimates by 3%/2% for FY21/22E to reflect the improving outlook for tractor volumes, mix and cost savings.

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