Asit C. Mehta is bullish on Escorts and has recommended buy rating on the stock with a target of Rs 153 in its February 1, 2011 research report.
"Escorts (EL) reported below then estimated numbers for Q1 FY11. EL revenue grew 38.2% on YoY basis to Rs 8,377.4 million. Operating profit margins declined 370 bps on YoY basis to 5.2% .Net profits Increased marginally on YoY basis to Rs 254.9 million."
"In Q1 FY11, EL revenue increased to Rs 8,377.4 million from Rs 6,721.3 million in Q4 FY10 an increase of 24.6% on Q-o-Q basis. Revenue increase was on back of increased tractor sales (17.3% on Q-o-Q basis) and increased realization on tractors (10.9% on Q-O-Q basis). The Operating margins in Q1 FY11 stood at 5.2%. The operating margins increased marginally by 30 basis points on Q-o-Q basis. EL reported operating profit of Rs 438.3 million as compared to 326.5 million in Q4 FY10. EL faced raw material cost pressures in the tractor segment (steel and rubber), which led to lower than expected operating margins. Net Profit was Rs 254.9 million as against Rs 268.5 million in Q4 FY10."
"Given the pressure on the margins, we have lowered our EPS estimate to Rs 17 in FY12. We assign multiple of 9x to arrive at value of Rs 153 per share. We maintain "Buy" recommendation on the stock," says Asit C. Mehta research report.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management.Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
