Motilal Oswal's research report on Escorts Kubota
Escorts Kubota (ESCORTS) hosted the investing community, followed by the plant visit at its Faridabad facility, where the entire senior management presented their mid-term strategy (till FY28E) and focus areas (link to the presentation). The company is now focusing on leveraging strong synergy benefits for a comprehensive growth across business areas. The company’s focus would revolve around a) growing market share in India (through new product launches and channel expansion), b) attaining leadership position in exports (through product developments), c) continuing with the ramp-up of other businesses, and d) improving profitability.
Outlook
The stock trades at ~24.9x consolidated FY24E EPS, at a premium to its 10-year average of ~12.6x, driven by an improvement in operating parameters as well as the Kubota partnership. While the tractor cycle seems to be uncertain, the valuations are already reflecting volume recovery as well as the benefit of Kubota partnership. We reiterate our Neutral rating with a TP of INR1,875 (20x Dec’24E consolidated EPS).
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