Cholamandalam Securities is bullish on Escorts has recommended buy rating on the stock with a target price of Rs 1071 in its research report dated August 01, 2018.
Cholamandalam Securities' research report on Escorts
In 1QFY19, Escorts reported strong set of numbers. Revenue grew by 32.3%YoY to INR 15,113mn led by growth (25% YoY) in Agri Machinery products segment due to strong tractor growth. Construction equipment revenues grew 50% YoY led by robust infrastructure demand EBITDA grew by 90% YoY to INR 1,855mn. EBIDTA margins improved sharply 374 bps YoY to 12.3% led by robust top-line growth coupled with low margin base of corresponding quarter. The Agri Machinery segment EBIT margins came in at 14.2 %( +340bps YoY), while the Construction segment EBIT margins rose to 2.4% (+450 bps YoY). PAT grew by 91% YoY to INR 1,196mn. PAT margin stood at 7.9%.
At CMP, the stock is trading at P/E of 16.4X/14.3x on FY19E/FY20E EPS, respectively. We arrive at a revised price target of INR 1,071 based on P/E of 17x FY20EPS and maintain a BUY rating on the stock.
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