Escorts Kubota Ltd. share price target

In-line revenues, strong margin beat: Escorts' (ESC) 1QFY17 revenues grew 9.4% YoY to INR10,514m (v/s estimate of INR10,853m), driven by a strong performance in construction equipment (+34% YoY), while tractors grew at 6% YoY, despite volume growth of 10%. Retail-level volume growth in tractors was strong at 19% as channel inventory correction stood at 1,500 tractors. Railways reported 12% revenue growth, while the auto business de-grew by 31%. EBITDA margin grew strongly by 230bp to 8.3%, mainly driven by gross margin improvement of 250bp. EBITDA grew by 52% to INR878m, while adjusted PAT...

Since late March initiation Escorts has seen a 56% surge in stock price and we thought it would be worthwhile revisiting our thesis. We spoke with top dealers (who form over 4?5% of the company’s volumes) in its five key states to understand the on?the? ground scenario and were positively surprised: (1) they expect double?digit growth across regions if monsoon pans out normally, (2) total product revamp over the last two years with over 15 new launches/refreshes to help increase volume growth; new product launches to continue, (3) product quality has improved dramatically and is now best in class, (4) increased aggression; price corrections due to cost savings have helped Escorts to become more competitive, and (5) management and promoters have increased consistency and frequency of their interaction of with dealers. These changes have sent a strong message out to the dealer and farmer community. Phillip Capital have upped our estimates to incorporate improving volume outlook and better margins in the tractor division(+19%/22% for FY17/18)– and reiterate BUY with a revised TP of Rs 280 (Rs 210 earlier) valuing the company at 11x FY18 earnings (adjusted for treasury stock).

Trendlyne has 7 reports on ESCORTS updated in the last year from 4 brokers with an average target of Rs 228.8.Brokers have a rating for ESCORTS with 2 price upgrades in past 6 months and 1 price downgrades in past 1 Year.

PAT to register CAGR of 60% on revamped sales strategy and costcutting measure

Tractor business (80% revenue share) is likely to see a rebound with sales CAGR of 14% over FY16-18E due to strategic decisions taken over the past two years. ? Apart from expectation of normal monsoon in FY17 (after 2 consecutive weak monsoons), Escorts will benefit from following initiatives: i) launch of 10 new models, including the innovative Anti-Lift tractor, to bridge gaps in its portfolio; ii) separate dealership for Powertrac and Farmtrac in northern markets to increase service area of dealers; iii) focused support to selected dealers in the south and west regions to increase market share. ? EBITDA margins to expand from 4.1% in FY16 to 7.6% in FY18 driven by a) initiatives to further lower RM costs by 80bp through vendor rationalization and value engineering, b) Employee cost reduction by 260bp through VRS over FY16- 18E, and c) operating leverage benefit (~12% CAGR in volumes). ? Increase in tractor volumes and revival in the construction segment due to a rise in road sector tenders (up 41% in 2HFY16 YoY) should also aid margin expansion, while railways could be a major opportunity in the making. ? With initiatives to revamp sales growth, cost cutting and low level of utilization (at 52% in FY16) in tractor business (80% of revenue), They believe Escorts is on course to deliver 60% PAT CAGR. Motilal Oswal initiate coverage with a ‘Buy’, value the stock at 10x FY18 EPS (30% discount to M&M) and arrive at a PT of INR283 (upside of 56%)

Trendlyne has 6 eports on ESCORTS updated in the last year from 4 brokers with an average target of Rs 187.3. Brokers have a rating for ESCORTS with 1 upgrade,0 downgrades in past 6 months and 1 downgrade in past 12 months.

8 Revenue down 2% yoy (trailed our estimate by 3%), mainly as company changed accountingtreatmentfordiscountsnownettingitfromsales. 9 EBTIDAmarginat4.8%wasaboveourestimateof3.6%asrawmaterialrationalisation...

BUY Escorts Ltd CMp at Rs. 174 Add on Dips to band Rs.174-134 for the Target of Rs. 196

Background: Escorts Ltd (ESC) is one of India's prominent players in the Automotive / Tractor industry, with an overall market share of ~11% 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. ESC has also forayed into Auto Ancillary and Railway division which are still at a nascent stage. Key...

Escorts' Q3FY16 performance was subdued, as its operating margins declined 84 bps YoY (up just 16 bps QoQ) to 3.8% as against our estimate of 4.7%, impacted by low volume and inferior product mix in both the segments, agri as well as construction equipment segments.

Background: Escorts Ltd (ESC) is one of India's prominent players in the Automotive / Tractor industry, with an overall market share of ~11% 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. ESC has also forayed into Auto Ancillary and Railway division which are still at a nascent stage. Key...

Escorts' Q2FY16 performance was subdued, as its operating margins declined 220 bps QoQ (up just 31 bps YoY) to 3.7% as against our estimate of 5%, impacted by low volume. Its Revenues/EBIDTA/PAT declined 19%/12%/-24% YoY and 18%/49%/53.6% QoQ to Rs8bn/Rs295mn/Rs171mn as against our estimate of Rs8bn/Rs400 mn/Rs164mn in Q2FY16.