Management Meet Update: Escorts Ltd - BUY - TP Rs.1051 - Kotak

In its recent interaction with analysts, Escorts management shared its vision 2022 - 2.5x revenue (over FY17) with more than 10% revenue coming from exports, achieving EBITDA margin of 13-14% and RoCE of 25-30%. Management highlighted that all the business segments will play a key role towards achieving its 2022 targets. Gaining market share in the tractor segment, volume traction in construction equipment segment, huge growth opportunities in railway equipment business will drive revenue growth for the company, as per management. EBITDA margin expansion is expected to come from cost reduction program, operational leverage from higher volumes, continued turnaround in the construction equipment business and increased share of higher margin business in the railway equipment division. We revise our tractor volume estimates to bring it near Escorts and M&M FY19 tractor industry growth guidance of 7-8%, resulting in upward revision in FY19/20E earnings. We revise our target price upwards to Rs1,051 (earlier Rs959) and continue to recommend BUY on the stock. Significantly weak monsoon is a key risk to our earnings estimate.

Shares of ESCORTS LTD. was last trading in BSE at Rs.876.2 as compared to the previous close of Rs. 874.5. The total number of shares traded during the day was 108357 in over 1888 trades.

The stock hit an intraday high of Rs. 886 and intraday low of 864.15. The net turnover during the day was Rs. 94732878.

Source : Equity Bulls

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