Neutral Escorts Kubota; target of Rs 3,145: Motilal Oswal

Motilal Oswal's research report on Escorts Kubota

Escorts Kubota (Escorts)’s 4QFY24 result was broadly in line. Standalone EBITDA margin came in at 12.8% (down 70bp QoQ). The near-term business outlook appears weak, especially for the agri segment, due to the ongoing election, lower groundwater level, and weak Rabi output.

Outlook

The stock trades at ~33.9x/28.5x consolidated FY25E/26E EPS, representing a premium to its 10-year average of 17.3x, driven by an improvement in operating parameters as well as the Kubota partnership. Moreover, the valuation also reflects possible opportunities arising from Kubota’s parentage (i.e., agri implements, exports, component supplies, etc.) as most of these opportunities will become relevant only beyond FY25. Reiterate Neutral with a TP of INR 3,145, based on 26x Mar’26E EPS (vs. 25x earlier).