Escorts Kubota Ltd. share price target

Resurfaced chip availability concerns amid geopolitical issues Russia is the largest producer (~40% share in global production) of rare earth metal palladium, which is used in manufacturing of semiconductor. Further Ukraine is the largest producer of neon gas, which is another important component for semiconductor (chip) manufacturing. Therefore, any supply chain disruption of these critical raw materials in this space would impact the availability of chips, resulting in an adverse impact on OEM volumes and associated productivity. Rise in Brent crude to impact margins as well as demand...

We maintain our HOLD rating on the stock keeping our target price unchanged at Rs 1,900, valuing the company at 19x FY24E P/E.

...

Escorts has been among the leading players in the tractor industry.

Escorts in involved in production of agri-machinery, construction and material handling equipment and railway equipment from its plants at various locations. The company sells a wide range of tractors under the Farmtrac,...

We maintain our HOLD rating on the stock. We revise our Target Price to Rs 1,900 (Rs 1,450 earlier) based on 19X FY24E EPS (15X FY24E EPS earlier).

ESC's board on 18 Nov'21 approved sale of ~6.4% stake in the company to Japan's Kubota Corp. for ~INR18.7b (at INR2,000/share), taking Kubota's stake to ~16.4% (after the extinguishment of the first round of treasury shares). This will trigger an open offer by Kubota for a 26% stake in ESC. Assuming the successful open offer and cancellation of all treasury shares, Kubota's stake in ESC will rise to 53.5%. Its stake will rise further as it is consolidating its Indian operations under ESC by merging two JVs in India with ESC. These transactions further strengthen its relationships, which was initiated in Dec'18 through a JV and transited to ~10% stake purchase in Mar'20....

Despite lower volume in tractor, EL reported 1% revenue growth in Q2FY22. This was largely on account of 59% YoY growth in Construction Equipment's and 6% YoY growth in Railway segment. EBITDA margin contracted by 570bps due to adverse impact of rising commodity cost and negative operating leverage. The government's action towards improving the agricultural productivity through mechanization will continue to drive volume growth. However, due to the ongoing pandemic the government's...

Operationally inline quarter