Neutral Escorts Kubota; target of Rs 3725: Motilal Oswal

Motilal Oswal's research report on Escorts Kubota

Escorts Kubota (ESCORTS)’s 1QFY25 result was largely in line with ourestimate. While the Agri and Railway segment margins were slightlydown YoY, the Construction Equipment segment posted healthy marginexpansion in 1QFY25. We cut our FY25E EPS by 5% to factor in lower monthly tractorvolumes, while maintaining our FY26E EPS. However, we believe thecurrent valuation of ~43x/33x FY25/26E EPS already reflects thesynergy benefits arising due to the partnership with Kubota. Wereiterate our Neutral rating on the stock with a TP of INR3,725, basedon ~28x Jun’26E EPS.

Outlook

The stock trades at ~43x/33x consol. FY25E/26E EPS, representing a premium to its 10-year average of ~17x, largely driven by the Kubota partnership. We reiterate our Neutral rating with a TP of INR3,725, based on ~28x Jun’26E EPS.