SPA Securities' report on Escorts
Escorts Ltd. (EL) reported net sales of INR 20.1 bn in 3Q FY21 (~23.5% increase over INR 16.3 bn YoY) and a PAT of INR 2.8 bn (up 83% YoY). Escorts Farm Equipment (EFE) segment volume increased 25.7% while Escorts Construction Equipment (ECE) segment volume increased 20.1%. EBITDAM (excluding other income) improved by 505 bps YoY (-30 bps QoQ) on the back of improving product mix, benign commodity prices and various cost cutting measures and positive operating leverage and. RM cost as % of sales decreased 118 bps while Operating & Manufacturing Expenses decreased 247 bps while employee expenses as % of sales decreased 140 bps.
At CMP of INR 1334, stock is trading at 13.1x its FY22E earnings (vs average of 20.8x for last 5 years). We Recommend Buy with a revised fair price estimate of INR 1577 in 12 months, 15.5x its FY22E EPS.
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