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CD Equisearch
Escorts (Hold)
Target: ₹1,750
CMP: ₹1,814.85
Escorts is involved in the production of agri-machinery, construction and material handling equipment and railway equipment from its plants at various locations.
Escorts’ agri-machinery business reported 28.9 per cent drop in EBIT as margins swooned (15 per cent vs 19.7 per cent in Q2-FY21). Escorts tractor market share anything but rose (down 171 bps quarter on quarter). As an indication of adverse product mix, Escorts derived 60 per cent of its total tractor volumes from 40 hp or more as against 63 per cent in the same period last year. Though Escorts railway equipment business has perceived higher-order tendering, traction in order execution is yet to come by.
Pending the ‘strategy blueprint’, the impact of the Kubota deal is hard to decipher. Weighing odds, we assign a ‘hold’ rating with a revised target of ₹1,750 (previous target: ₹1,610).
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