Buy Escorts;target of Rs 174: Khambatta Securities

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26 Aug, 2025 12:21

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Khambatta Securities's research report on EscortsThe 2015 monsoon ended with a deficit of 14%. Failing crops, mounting debt and reduction in Minimum Support Price (MSP) led to decline in tractor sales. Escort expects, overall industry tractor sales will decline by 10% in FY16. However, Government’s focus to revive agricultural sector & rural economy and La Nina monsoon forecast is expected to boost demand for tractors in FY 2017. India can achieve a CAGR growth of 8-9% for tractor sales in the long term.At CMP stock is trading at 18.8x TTM EPS of Rs 7.2. We have used couple of methodologies to reach the fair equity valuation. Our DCF valuation is Rs 172 based on Cost of Equity of 14.58% and perpetual growth rate of 4%, while our relative valuation is Rs 175 based on 11.5x FY 18E EPS of Rs 15.2. We have assigned the valuation weightage of 50% each to DCF & relative valuation and consequently we arrive at a target price of Rs 174 which implies 29% upside. We initiate Escorts common stock with a “Strong Buy” rating.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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