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Reliance Securities
Escorts (Buy)
CMP: ₹794.3
Target: ₹1,250
Escorts’ charts resemble that of Hindustan Unilever. However, break took place in 2016 and price rallied until ₹1,000-mark. In the given scenario stock price has posted a deep pull-back. However, this pull-back formation is a corrective move to the previous rally. This correction has possibly completed and is now gearing up to retest the ₹1,000-mark. A decisive break above ₹850-860 will open the way for the initial target of ₹1,000 level and then will continue to oscillate higher into the uncharted the territory until ₹1,200-mark.
Fundamental view: Being a key player in the agri equipment space, Escorts (ESC) is least impacted by the current turmoil led by Covid-19 pandemic.
About 80 per cent of its revenue is attributable to tractor and agri equipment, while in terms of operating profit, agri equipment business contributes 85 per cent to its sales.
Expectation of normal monsoon encourages the farmers and keeps rural sentiment positive. Further, the government’s focus on agri output and rural thrust would help rural market ahead of others in FY21E.
Its latest Kubota deal further increases our confidence on Escorts’ capability and future synergy would drive global business ahead of competition.
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