Emkay Global Financial's report on Escorts
Q1FY21 revenue declined 25% yoy to Rs10.6bn (est.: Rs10.8bn). Earnings grew 5% to Rs922mn, above estimates of Rs877mn, boosted by higher-than-expected EBITDA margin of 11.3% (est.: 10.7%), Margin beat was aided by cost reduction efforts. Led by expectations of a strong recovery, we increase ESC’s FY21 tractor volume estimate by 6% to 90,701 units and FY22 volume forecast by 4% to 101,762 units. We expect volumes to grow at a 9% CAGR over FY20-22E. We expect Escorts to sustain the market share in domestic tractors, led by aggressive marketing efforts, success of its dual-brand strategy – Farmtrac and Powertrac series, and focus on network expansion.
Outlook
We expect a 10% CAGR in revenues and 21% in earnings over FY20-23E, driven by volume up-cycle and margin expansion. We retain OW stance in EAP and Buy rating, with a TP of Rs1,256 (Rs1103 earlier), based on 16x Sep’22E core EPS (Mar’22E earlier).
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