November sales data for Escorts was below what the market was estimating. Credit Suisse however has initiated coverage on the stock with outperform rating, saying that the tractor cycle will remain strong for two years.
Charting a confident outlook for FY18, Bharat Madan, CFO, Escorts said they have 72,000-75,000 units as a target for FY18 and expect the monthly run rate of 6000 units.
He is confident that H2 would be better than H1 on back of strong demand witnessed on the ground.
Although the wholesale growth was slower in November on account of high inventory, the growth going forward for them continues to remain strong, said Madan.
The margins for the tractors are also expected to be strong at around 12 percent in FY18, said Madan.
The market share by the end of the years would likely be around 11-11.5 percent, he said.
Throwing more light on the sale of treasury shares worth Rs 250 crore, he said the money raised would be utilised for growth. There is possibility of M&A in railway space and some tie-ups under the construction equipment space, said Madan. He also confirmed at in the short to medium term they have no plans to sell more treasury shares.
With regards to railways segment, he said the order book in that segment is very strong. The company already has next year’s full orderbook of around Rs 275 crore and margins for that would be in range of 15-16 percent, said Madan.
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