Earnings Update - Escorts (LT IN) - Margins improvement to continue - CSEC Research

Margins improvement to continue

- In 4QFY17, ECS' revenues grew significantly by 30% YoY to INR 10.4bn led by robust volume growth, however down 4% QoQ impacted by lower volume because of seasonality. Tractors volume grew robustly by 26.7% YoY to 14,978 units and Construction volume grew by 40% YoY to 1,037 units. For FY17, revenue grew by 21.2% to INR 41.5bn against INR 34.4bn in FY16 led by volumes.

- EBITDA grew by 70% YoY to INR 744mn with EBITDA margin at 7.1% (+170 bps YoY). PAT grew 224% YoY to INR 595mn. For FY17, EBITDA grew by 83.5% to INR 3.23bn.

Valuation: At CMP the stock trades at 15.6X FY19E, we upgrade the stock a BUY rating with revised target price of INR 800, assigning the PE of 18X FY19E.

Risks: Slow pace in infrastructure spending, delay in agriculture subsidies by the Government.

Shares of ESCORTS LTD. was last trading in BSE at Rs.716.25 as compared to the previous close of Rs. 692.4. The total number of shares traded during the day was 387428 in over 7981 trades.

The stock hit an intraday high of Rs. 718.9 and intraday low of 695.05. The net turnover during the day was Rs. 274449790.

Source : Equity Bulls

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