Escorts Kubota Ltd. share price target

Segment wise performance: (Escorts Agri Machinery): Tractor volumes came in at 21,073 units during 2QFY22 vs. 24,441 units in 2QFY21 (-14% YoY). Segmental revenue at 12.5bn during 2QFY22 vs. 13.2bn in 2QFY21 (-6% YoY). (Escorts Construction Equipment): The sales volume for 2QFY22 was up 31% at 1,074 machines as against 821 machines in 2QFY21. The break-even number currently is 250 machines per month. EBIT margin for 2QFY22 stood at 3.6% against 1.7% YoY. Going forward, with improved funding availability and government thrust on infrastructure projects, demand is expected to recover to its full potential. (Railway Equipment Division) recorded a top line of 170mn vs. 160mn in...

Escorts reported a decent performance in 1QFY22 with top line growing by 56.2% YoY to 17.1bn (low base of 1QFY21), however there was a decline of 24% QoQ on account of a 20% QoQ decline in tractor volumes and fall in revenue in the Construction Equipment (ECE)...

We maintain our BUY rating on the stock keeping our target price unchanged at Rs 1,350 valuing the company at 15x FY23E P/E.

Operating performance in 1QFY22 was driven by strong growth in the Tractor business (benefitting from the mix). The demand outlook is turning murky, which raises uncertainties over the next 12-15 months, though Kubota JV, leaner cost structure, recovery in the Railways/Construction Equipment, and a strong Balance Sheet will dilute impact on the P&L.; We cut our FY22E/FY23E EPS by 2%/11% to factor in weaker volumes. We...

We recommend BUY with TP of Rs. 1,350/share.

Escorts reported robust 4QFY21 performance with revenue growing by 60% YoY to 22bn led by 64% growth in Agri machinery products, 53% growth in construction equipment and 36% growth in railway equipment segment. EBITDA margins came...

EBITDA margin expanded by150bps due to better product mix, price hike and cost reduction. PAT grew by 93.5%YoY. 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 subsidy likely to be limited for the year FY22. Revenue & PAT to grow by 11%/12% CAGR over FY21-23E owing to better product mix , exports and Industry recovery....

Raw material costs have increased 8-10% for Escorts in the past few months amid a sharp spike in prices of key inputs like steel and rubber (combined form ~70% of a tractor by weight). The company has been able to pass on just ~5% via price hikes so far, with one more scheduled for Q2FY22E. Apart from steep cost inflation, other margin headwinds are beginning to appear. With non-agri tractor segment set to grow faster than agri tractor segment in FY22E, product mix (in hp terms) is set to normalise towards previous levels. Faster growth of lower-margin verticals (CE and RED) vs. tractors is...

We maintain our BUY rating on the stock but with a revised target price of Rs 1,350 (from Rs 1,600 earlier) valuing the company at 15x (from 17x earlier) FY23E P/E.

In-line results; positive outlook still intact