Buy Escorts Kubota; target of Rs 3900: Anand Rathi

Anand Rathi's research report on Escorts Kubota

Slightly above our estimated Rs3.12bn, Escorts’ Q1 EBITDA grew 3% y/y to Rs3.35bn due to better-than-expected agri-machinery margins (lowerthan-expected input/employee cost). We expect 8%/13% revenue/ EBITDA CAGRs over FY25-28 driven by a ramp-up in its non-vehicle revenue (a 17% CAGR), strong exports (35% volume CAGR) and gradually improved market share (over FY27/28). 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 introduce our FY28e, with 10/13/10% revenue/EBITDA/PAT growth.

Outlook

The stock trades at 27x/24x FY27e/28e core P/E. We retain a Buy with a Rs3,900 TP (earlier Rs3,900; 30x FY27e), 30x Sep’27e core EPS and Rs587/sh cash.