Escorts Ltd - Q2FY21 First Cut - ICICI Securities

(CMP: Rs. 1,230; MCap: Rs. 15,068 crore)

Escorts reported stellar Q2FY21 results, with all operating parameters delivering a beat on our estimates. Margin performance, in particular, was eye catching - the 18.3% print being the highest reading of the past decade.

Q2FY21 Earnings Summary

- Total operating income for Q2FY21 came in at Rs. 1,640 crore, up 15.2% YoY vs. our estimates of Rs. 1,514 crore. Within its segments, gross revenue from agri equipment machinery (EAM) i.e. tractors stood at Rs. 1,322 crore (I-direct estimate Rs. 1,290 crore). Tractor ASP for the quarter stood at Rs. 5.4 lakh/unit, up 7.7% YoY. Tractor sales volume for the quarter stood at 24,441 units, up 23.8% YoY

- Gross Revenue from construction equipment de-grew by 22% YoY to Rs. 157 crore while railway equipment division was a substantial positive surprise. Its revenues grew 26.4% YoY to Rs. 160 crore vs. our estimate of Rs. 89 crore. Volumes in the construction equipment declined by 13% YoY to 821 units. Present Railway order book of > Rs. 350 crore is expected to be executed over the next 6-8 months

- EBITDA in Q2FY21 stood at Rs. 301 crore (up 137.4% YoY) with attendant EBITDA margins at 18.3% (up 878 bps YoY; I-Direct estimate:13%). The sharp 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 (I-direct estimate: Rs. 160.3 crore)

- Escorts generated CFO and FCF of Rs. 778 crore and Rs. 734 crore respectively in H1FY21 vs. corresponding prints of Rs. 303 crore and Rs. 207 crore respectively in H1FY20. Higher profitability coupled with improved working capital management led to the impressive cash generation

Escorts' Q2FY21 performance was well above our estimates, with stupendous improvement in profitability of tractor division to near industry-best standards being a noteworthy achievement. We remain positive on the company courtesy prevailing tailwinds in the domestic tractor industry but management commentary on sustainability of margin profile at these levels would be a key monitorable.

We would be coming out with a detailed report soon.

Shares of ESCORTS LTD. was last trading in BSE at Rs.1228.7 as compared to the previous close of Rs. 1201.3. The total number of shares traded during the day was 170147 in over 11848 trades.

The stock hit an intraday high of Rs. 1239 and intraday low of 1185.85. The net turnover during the day was Rs. 206557851.

Source : Equity Bulls

Keywords