Neutral Escorts Kubota; target of Rs 3380: Motilal Oswal

Motilal Oswal's research report on Escorts Kubota

Escorts Kubota’s (ESCORTS) 1QFY26 PAT of INR3.1b was in line with our estimate. Tractor segment margins exceeded our estimates, whereas construction equipment (CE) margins came in below estimates. While the tractor industry outlook is positive, continued market share loss for ESCORTS has been the key concern. Further, the CE business is likely to take time to normalize given the recent sharp price hikes after the shift to new emission norms. Though there are notable synergies between Escorts and Kubota, they will likely materialize over the medium to long term. Given this, the stock at ~32x/29x FY26E/27E EPS appears fairly valued. We maintain a Neutral rating with a TP of INR3,380, based on ~28x Jun’27E EPS.

Outlook

Though there are significant synergies between Escorts and Kubota, they will likely materialize over the medium to long term. Given this, the stock at ~32x/29x FY26E/27E EPS appears fairly valued. We maintain a Neutral rating on the stock with a TP of INR3,380, based on ~28x Jun’27E EPS.