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Escorts Q3 consolidated profit up 11%: here are highlights of analyst call

The agri sector will continue to drive growth whereas Infrastructure sector may take some time to recover (35-40 percent of sales).

January 31, 2020 / 05:45 PM IST
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Tractor-maker Escorts on January 29 reported an 11.05 percent year-on-year growth in third quarter consolidated profit at Rs 154.87 crore.

The profit in corresponding period last fiscal stood at Rs 139.46 crore.

Revenue from operations during the quarter declines 1.27 percent to Rs 1,650.22 crore as tractor volume declined 2.5 percent and construction volume 26.1 percent YoY.

Here are highlights of Escorts' earnings call, collated by Narnolia Financial Advisors:

Management participants: Shenu Agarwal-CEO (Agri Machinery), Ajay Mandahr-CEO (Construction Equipment), Shailendra Agarwal-CEO (Railways Division), Bharat Madan-CFO (Tractor Industry)


The domestic tractor industry has declined by 6 percent YoY in 3QFY20. The north and central regions degrew by 4.2 percent, whereas industry degrew by 8.1 percent in the south and the west.

The management expects 4 percent YoY growth in Q4FY20 and a positive growth momentum in FY21, expecting a full recovery in FY22.

The agricultural sector will continue to drive growth, whereas infrastructure may take some time to recover (35-40 percent of sales).

Farmtrac and Powertrac sales ratio stands at 39:61 (41:59 in 2QFY20).

The industry share of 41-50HP tractors has improved by 100bps to 48.5 percent.

Dealer inventory remains at three-four weeks against five weeks at industry level.

Non-tractor contribution stands at around 10 percent of sales.

Capacity utilisation stands at around 78 percent.

JV with Kubota

The company has a contract manufacturing agreement with Kubota.

Phase 1 investment done in FY19 and Phase 2 investment of approximately Rs 60 crore in FY20.

Escorts Products offering under Joint Branding “E Kubota” to global market.

Export started from Q3FY20.

The JV manufacturing facility is expected to start from 2QFY21.

Construction equipment

The served industry (Backhoe Loaders, Pick n carry crane and Compactors) went down by 22.3 percent YoY in 9MFY20.

The company has over 40 percent market share in Crane segment.

The segment margin stands at 4.8 percent (2.7 percent in Q2FY20).

The management plans to launch new products in next 12-15 months.

Capacity utilisation stands at around 40 percent.

Railways equipment division

The order book stands at Rs 450 crore to be executed over 12-15 months.

The management expects growth of 25 percent over next 2 years.

Localisation level stands at 60 percent and it is expected to improve further from FY22.

Other details

Capex guidance of Rs 250 crore each for FY20 and 21.

The management expects increasing commodity price impact to come in from Q1FY21.

The cash and cash equivalent stands around Rs 700 crore.
Moneycontrol News
first published: Jan 31, 2020 05:45 pm
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