ICICI Direct recommended hold rating on Escorts with a target price of Rs 600 in its research report dated May 08, 2019.
ICICI Direct's research report on Escorts
Escorts reported muted performance in Q4FY19. Revenues increased by 13.6% YoY to Rs 1,632 crore but were impacted by realization hit due to adverse mix in tractor segment. Segment wise revenues; tractors up 12.5% YoY to Rs 1,231 crore, construction equipment up 10.2% YoY to Rs 293 crore, railway equipment up 36.1% YoY to Rs 104 crore. EBITDA in Q4FY19 grew 9.2% YoY to Rs 190 crore with consequent EBITDA margins at 11.6%, down 50 bps QoQ and YoY primarily tracking 120 bps sequential increase in other expenses. Consequent PAT stood at Rs 121.3 crore, up 7.8% YoY. In parallel, enhanced competitive intensity would result in limited scope for further margin gains at Escorts.
We value the company at 12.5x FY21E EPS of Rs 48.6/share, arriving at a target price of Rs 600 and assign a HOLD rating to the stock.
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