Buy Escorts; target Rs 103: Nirmal Bang

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26 Aug, 2025 12:21

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Nirmal Bang's report on Escorts

"Escorts has seen management changes in the past one year. Management had prepared a road map for the company where it had outlined various initiatives which would ultimately lead to improvement in the EBITDA margins of the company 3x from the levels of ~5 percent.  Management has also shifted focus towards the higher margin yielding higher HP segment which now contributes more than 50 percent of sales. The change in product mix, determination to target higher levels of profitability by focusing on cost discipline (manpower and raw material cost) has started yielding results in the form of improvement in the company's performance from the last 2-3 quarters. We believe that Escorts is currently at an inflexion point from where improvement signs is visible and in our view will continue.We expect Escorts to witness a CAGR growth of 24.6 percent in EBITDA and 51.4 percent in profitability over FY12-FY14E leading to an improvement in its RoE from 4.3 percent in FY12 to 8.9 percent in FY14E and RoCE to improve from 6.1 percent in FY12 to 9.5 percent in FY14E. Over the last three years, Escorts Ltd has traded at a PE multiple of 6-10x. At CMP, the stock trades at an attractive multiple of 6.7x and 5.8x its FY13E and FY14E EPS of Rs11.9 and Rs13.7 respectively. Assigning a target multiple of 7.5x on FY14E we arrive at a target price of Rs 103 indicating an upside of 28.7 percent from current levels. Buy the stock," says Nirmal Bang research report.

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