Cholamandalam Securities is bullish on Escorts has recommended buy rating on the stock with a target price of Rs 744 in its research report dated January 29, 2019.
Cholamandalam Securities' research report on Escorts
In 3QFY19, Escorts’ revenue grew by 37.3%YoY to INR 16.5bn as against CSEC estimate of INR16.1bn on account of strong volume growth in agri-machinery and construction equipment segments. Domestic agri-machinery volume grew by 34.2% YoY and exports volume grew by 99.8% YoY. Agri-machinery segment reported revenues of INR12.9bn and an EBIT margin of 14.3%, down by 34bps YoY. The margins in this segment were impacted due to unfavorable product mix on account of higher sale of lower margin <40HP tractors. Construction equipment showed a robust growth of 44.1% YoY with revenues of INR 2.65bn on the back of 30% YoY volume growth. The EBIT margins in this segment stood at 3.5% up by 127bps YoY.
Outlook
We introduce and roll over our valuations to FY21E. At CMP, the stock is trading at P/E of 10.8X/10.4x on FY20E/FY21E EPS, respectively. We arrive at a revised price target of INR744 based on P/E of 12x FY21EPS (10 year average 1yr forward P/E) and maintain a BUY rating on the stock.
For all recommendations report, 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.
Read More
