Buy Escorts Kubota; target of Rs 3900: Anand Rathi

Buy

Anand Rathi's research report on Escorts Kubota

Escorts’ Q3 PBT (incl. discontinued operations) grew 7% y/y to Rs4.2bn, below ARe of Rs4.4bn mainly due to less-than-expected agri machinery margins. We are enthused about the company as we believe FY25 would bring a ramp-up in its Vision 2028 execution and a turnaround in tractors. Its merger with Kubota, strong tractor cycle, new products & platforms, and recovery in exports will be positive for the company. Key Vision 2028 strategies: new platforms for domestic/exports, component/R&D services exports, operating captive finance and ramping up plans for other segments. We expect healthy (incl. JV, Railways divestment), 14%/22% revenue/EBIT CAGRs over FY25-27.

Outlook

The stock trades at 31x/24x FY26e/FY27e core P/E. We retain a Buy rating, with a lower Rs3,900 TP (earlier Rs4,300), 30x FY27e core EPS and Rs603/sh cash.

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Escorts Kubota - 12022025 - anand