Escorts Kubota Ltd. share price target

Escorts (ESC) reported strong all-round performance in Q2FY21. EBITDA jumped 137% YoY to Rs 3bn with significant margin expansion at 18.3% (+878bps YoY; +708bps QoQ) on account of better mix (2/3rd...

Seminal year for industry provides interesting insights However, amid all the gloom, the engineering and production prowess of the industry (along with its value chain) shone brightly as it successfully completed the world's fastest switchover to Euro 6 equivalent emission norms i.e. BS-VI as per schedule. Much of the post festive period was focused on the transition, with the entire ecosystem estimated to have spent ~| 70,000 crore towards the technological leap. Covid-19 crisis struck India in the run up to April 2020, just as the changeover...

We revised our volume estimate and factor 13%YoY growth for H2FY21 and 20% growth from H1 to H2 owing to significant farm mechanization and higher government participation. Escorts Ltd (EL) is the third largest Agricultural tractor manufacturer in India. It has strong presence in the north and west market, with an overall market share of 11.6% as on FY20. Tractor demand was robust across the country. Price realisation was very good as farmer's cash flow has been very strong....

Q1FY21 revenue de-grew by 25%YoY largely on account of production lockdown in April and May. However for the June month, the volume growth was 21%YoY. EBITDA margin expanded by130bps due to softening metal price,...

Escorts (ESC) is the third largest tractor manufacturer in India, commanding ~11% market share in the ~800,000-unit p.a. tractor industry.

Escorts Ltd. (EL) reported net sales of INR 10.6 bn in 1Q FY21 (~25.4% decline over INR 14.2 bn YoY) and a PAT of INR 922 mn (up 5.3% YoY). Escorts Farm Equipment (EFE) segment volume declined 13.8% while Escorts Construction Equipment (ECE) segment volume a declined 78.1%. EBITDAM (excluding other income) improved by 126 bps YoY (-282 bps QoQ) on the back of improving product mix, benign commodity prices and various cost cutting measures despite negative operating leverage and no price increases taken during the quarter. RM cost as % of sales decreased 185 bps while Operating & Manufacturing Expenses decreased 268 bps while employee expenses as % of sales increased 327 bps. Nationwide lockdown due to pandemic of Covid19 dragged volumes in both ECE and EFE divisions led de-growth....

Escorts reported relatively healthy Q1FY21 numbers. Total operating income was at | 1,062 crore, down 25.4% YoY. Within its segments, gross revenue from agri equipment machinery (EAM) i.e. tractors was at | 954 crore (down 12.7% YoY), tracking unchanged ASP QoQ (| 5.25 lakh/unit), 13.8% YoY decline in volumes to 18,150 units. Gross revenue from construction equipment (CE) de-grew 75.3% YoY to | 52 crore (volumes down 78% YoY to 234 units) while revenue from railway equipment (RED) was down 53.5% YoY to | 55 crore. Present railway order book of | 480...

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.