Geojit is bullish on Escorts has recommended buy rating on the stock with a target price of Rs 1090 in its research report dated May 30, 2018.
Geojit's research report on Escorts
Escorts Ltd (EL) is the third largest Agricultural tractor manufacturer in India. It has a strong presence in the north and west market, with an overall market share of 11% as on FY17. Q4FY18 revenue grew by 40.5%YoY led by 57%YoY volume growth in the tractor sales & 49%YoY from the construction business. EBITDA margins expanded 480bpsYoY driven by higher sales, price hike, and cost control indicatives. Normal monsoon and more state subsidiary for doubling the agricultural growth is expected to drive demand for tractors. We expect revenue & PAT to grow at 16% & 34%YoY CAGR over FY18-20E led by higher segmental revenue and new product launches.
Outlook
We expect EL to trade at a premium valuation given its strong earnings outlook, thus we upgrade our rating to Buy from Accumulate with a revised target price of Rs.1090 (25x FY20E EPS).
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