Buy Escorts; target of Rs 180: SPA Research

SPA Research report on Escorts

Escorts's Q4FY15 result came inline with estimates with revenue at INR 8177 mn and PAT at INR 126 mn. Agri machinery segment revenue declined 23.5% to INR 6136 mn whereas Construction Equipment segment revenue grew by 19.4%. The tepid outlook for its agri machinery segment is likely to get partially neutralised by double digit growth in other segments. We retain our BUY recommendation on the stock with a revised target price of INR 180 based on 6.25x FY17E EV/EBITDA.

Outlook & Valuation"We expect tractor industry to grow at a CAGR of 8.3% between FY15-17E. The management's focus on increasing the sale of higher HP tractors is likely to improve the overall realization for Escorts. Further, efforts are being undertaken to increase the presence in West & Southern market in India and also expand the global footprint. We expect top line & bottom line to grow at a CAGR of 14.0% & 67.4% respectively between FY15- 17E. We retain our BUY recommendation on the stock with a revised target price of INR 180 based on 6.25x FY17E EV/EBITDA", says SPA Research report.

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