Buy Escorts; target of Rs 160: Swastika Investmart

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Buy Escorts; target of Rs 160: Swastika Investmart

Swastika Investmart is bullish on Escorts and has recommended buy rating on the stock with a target of Rs 160 in its May 18, 2011 research report.

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Swastika Investmart is bullish on Escorts and has recommended buy rating on the stock with a target of Rs 160 in its May 18, 2011 research report.

"Escorts Limited, the flagship company of The Escorts Group is a leading manufacturer and supplier of Agri Machinery Products, Auto Suspension and Ancillary Products and Railway Equipments. The Company having one international subsidiary and now cater to 41 countries. Having pioneered farm mechanization in the country, Escorts has played a pivotal role in the agricultural growth of India for over five decades. One of the leading tractor manufacturers of the country. Since inception, company has manufactured over 1 million tractors. Beyond manufacturing, Company has made substantial investments towards the modernisation of farm technology."

"Full exemption from excise duty to trailers and semi trailers used in Agriculture" which likely to boost sales of agriculture machinery. Higher agricultural credit, extension of subvention of interest on farm loans and continued emphasis on expansion of Green Revolution in the Eastern state likely to increase demand of farm equipment, Agri-equipment and tractor segment.  Company Total income has increased with a CAGR of 10.98 % in last 3 years, from Rs 2108.28 Cr in FY-07 to Rs 2882.17 Cr in FY-10. Company converts its book from Loss of Rs 6.44 Cr in FY-07 to Profit of Rs 137.55 Cr in FY-10, which shows an incredible growth. For FY-10, Reserves & Surplus stood at Rs 1635.55 Cr. Vs Rs 1035.28 Cr in FY-07 with a CAGR of 16.47 %. Net worth of the company has increased to Rs 1673.36 Cr in FY-10 against Rs 647.07 Cr in FY-07, registering a CAGR of 37.26 %. Since last 2 years dividend policy of the company is quite stable and it's expected to continue in future also. Company reduces its debt burden from Rs 525.58 Cr to Rs 298.60 Cr in last 3 years."

"Company's top line performs quite stable and bottom line grew significantly over the last four quarters. Debt Equity Ratio of the company constantly decreases from 0.94 to 0.19 in last 4 years. Current Ratio of the company is stable at 1, which indicates company can meet its Current Obligations. Operating Profit Margin & Net Profit Margin is increases for last few years which indicate company uses its resources efficiently. Company having lowest Price Earning multiple and Price to Book Value ratio as compare to Peer Groups, which Indicates Company is undervalued. OPM and NPM of the company are at low level as compare to peers group but the pace at which it is growing is encouraging."

"On the daily chart of Escorts Ltd., a Fibonacci retracement is drawn from its all time low of 30.5 on 12thMarch 2008 to its 52 week high of 245.80 on 11th November 2010. At present stock is consolidating in Rs 125-130 range, which is near to its support of Rs 115 where one can find a buying opportunity to enter in the stock. Escorts had performed very well in last one & half years which would likely to be continue in future for the target price of Rs 160/185/210," says Swastika Investmart research report.

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To read the full report click on the attachment