Hold Escorts Kubota; target of Rs 1650: ICICI Direct

ICICI Direct's research report on Escorts Kubota

The company is a prominent tractor maker domestically (10.3% FY22 market share). It also serves domestic construction equipment, railways space. FY22 sales mix – tractors 77%, construction equipment 14%, railways 9% • Past five year CAGR: 24.1%, 35.6% in EBITDA, PAT; cash positive b/s. We retain HOLD rating on Escorts amid muted tractor growth prospects over FY22-24E & decline in market share as well as pressure on margins.

Outlook

We value Escorts Kubota Ltd at SOTP-based target price of Rs 1,650 (20x P/E on core FY24E EPS, 20% discount on treasury shares).