ICICI Direct is bullish on Escorts has recommended buy rating on the stock with a target price of Rs 1460 in its research report dated November 03, 2020.
November 07, 2020 / 01:41 PM IST
ICICI Directs research report on Escorts
Escorts reported stellar Q2FY21 results. Total operating income for Q2FY21 came in at Rs 1,640 crore, up 24% YoY. Within its segments, gross revenue from agri equipment machinery (EAM), tractors were at Rs 1,322 crore (volumes up 23.8% to 24,441 units, ASPs up 7.7% YoY to Rs 5.4 lakh/unit). Gross revenue from construction equipment (CE) de-grew 22% YoY to Rs 157 crore (volumes down 13% YoY to 821 units) while railway equipment division (RED) revenues grew 26.4% YoY to Rs 160 crore. EBITDA margins came in at multi-year high of 18.3% (up 878 bps YoY). The improvement in margins was attributable to tractor division recording 20% EBIT margins for the quarter (up 973 bps YoY) on the back of improved product mix, operating leverage benefits and cost control initiatives. Consequent standalone PAT in Q2FY21 came in at Rs 229 crore, up 119% YoY.
Sales, PAT FY20-23E CAGR is seen at ~11%, 27%, respectively. Continued strength in tractors and positive margin guidance help us retain BUY rating on Escorts. We value it at Rs 1,460 (SOTP, 17x P/E on average core FY22E & 23E EPS, 20% holding company discount to its treasury shares).
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