Escorts Kubota Ltd. share price target

However softening metal price, cost control initiative and superior product mix expanded the margin to 90bps at 13.1%. Adj. PAT grew by 18.5%YoY supported by lower tax. The government's action towards increase in rural income & consumption will be the prime factor in budget FY20-21. We expect the revenue to grow by 10% CAGR over FY20-22E by factoring 9% volume growth owing to pick up in the construction equipment and expected revival in the tractor sales....

Slim volume growth, muted market share gains to drag topline! Given the inherently cyclical nature of the domestic tractor industry and high installed base (record volume of 7.9 lakh units in FY19; 17.0% industry CAGR over FY16-19), our volume growth expectation for FY19-22E remains moderate (Escorts volumes seen growing at 2.8% CAGR to 1.04 lakh units). Market share gains would be required to propel growth at the company. However, FY20TD performance, thus far, is mixed (~16 bps improvement YoY to 11.2%; market share losses in key large states like Uttar Pradesh &...

Escorts 3QFY20 performance is a reflection of stability in volumes, benefit of mix improvement and cost savings, all of which should sustain in the coming quarters. Tractor volumes declined ~2% YoY, but net realizations improved ~2.4% YoY (+2% QoQ) to ~INR514.4k (v/s est. Tractor business PBIT margins improved 20bp YoY (+420bp QoQ) to ~14.5%. CE business PBIT margins improved ~130bp YoY (+210bp QoQ) to ~4.8%, driven by mix despite volume decline of 26% YoY. Rail business PBIT margins declined ~150bp YoY (-70bp QoQ) due to higher contribution of new products (having higher import content). It has got an approval for 3 new products and has a We are upgrading our EPS estimates by 9%/5% for FY20/FY21 to reflect the improving outlook for tractor volumes, improving mix and cost savings. We are upgrading our EPS estimates by 9%/5% for FY20/21 to reflect for improving outlook for tractor volumes, improving mix and cost savings.

Escorts Ltd (EL) is the third largest Agricultural tractor manufacturer in India. It has a strong presence in the north and west market, with an overall market share of 11.9% as on FY19....

struction equipment. The Company's segments are Agri Machinery, Auto Ancillary Products, Railway Equipment, Construction Equipments and Others. It is engaged in the business of manufacturing of engines for agricultural tractors, earth moving and material handling equipment, round and flat tubes,...

Domestic tractor industry has been at the forefront of farm mechanisation and witnessed robust growth in FY16-19, with total industry volumes rising ~50% to a record high of 7.9 lakh units in FY19. Due to its inherently cyclical nature, high base and muted farm incomes, we expect the industry to largely consolidate at this level of output in FY19-21E. While H1FY20 registered ~10% drop in volumes, excellent monsoons this year and some state subsidy support over H2FY20E are seen helping the industry post negative single digit decline in FY20E. Escorts has previously demonstrated its ability...

to ~INR504k due to a weaker mix. EBITDA margin of 9.6% (our estimate: 9.8%) was impacted by operating deleverage and an adverse mix in Tractor/Rail. PBT declined ~24% YoY, but lower tax drove PAT growth of ~10% YoY to INR1.1b (our estimate: INR1b). Tractor segment PBIT margin shrank ~440bp YoY (-60bp QoQ) to 10.3%. 1H performance: ESC reported positive CFO of ~INR3b (v/s negative ~INR2.7b in 1HFY19), led by lower working capital. FCFF was at ~INR2b (v/s INR3.4b in 1HFY19). Revenue/EBITDA/PAT declined ~6%/21.5%/9.5% YoY. Earnings call highlights: (a) Industry volumes declined 10% YoY. ESC's strong...

Early Cyclical Reversal on the Card; Upgrade to BUY Escorts (ESC) has delivered largely an in-line performance in 2QFY20. While its margin improved in construction equipment segment, the Company witnessed contraction in tractor margin. Its revenue and EBIDTA fell by 5% YoY (-7% QoQ) and 20% YoY (-11% QoQ) to Rs13.2bn and Rs1.3bn vs. our estimate of Rs13.3bn and Rs1.2bn respectively. However, due to tax credit, its adjusted PAT grew by 11% YoY (+30% QoQ) to Rs1.1bn vs our estimates of Rs865mn. Its EBIDTA margin fell by 169bps YoY and 44bps QoQ to 9.6% (vs. our estimate of 9%) mainly due to lower operating leverage and inferior product-mix in tractor segment. Better margins at construction segment...

Escorts Ltd (EL) is the third largest Agricultural tractor manufacturer in India. It has a strong presence in the north and west market, with an overall market share of 11.9% as on FY19. Q1FY20 revenue de-grew by 6%YoY below our estimates. This was largely on account of 14%YoY decline in tractor volume growth. Excess shortfall in delayed monsoon, Higher YoY base and lower water level at reservoirs are the key headwinds for the industry Despite the hike in price, margin contracted by 230bps due to...

Tractor business to consolidate post 50%+ growth in FY16-19! The tractor industry is cyclical in nature, with periods of healthy growth regularly being followed by periods of consolidation. The current up-cycle in the domestic tractor industry started after FY16. Succeeding years, thereafter, have posted YoY growth of 21%, 22% and 8%, taking domestic tractor industry volumes to record high of 7.9 lakh units in FY19. Escorts has outperformed the industry heavily by growing volumes at ~22% CAGR in FY16-19, also expanding market share to 11.8% as of March 2019. We...