SPA Securities recommended Hold rating on Escorts with a target price of Rs 1249 in its research report dated July 29, 2020.
SPA Securities' report on Escorts
Escorts Ltd. (EL) reported net sales of INR 10.6 bn in 1Q FY21 (~25.4% decline over INR 14.2 bn YoY) and a PAT of INR 922 mn (up 5.3% YoY). Escorts Farm Equipment (EFE) segment volume declined 13.8% while Escorts Construction Equipment (ECE) segment volume declined 78.1%. EBITDAM (excluding other income) improved by 126 bps YoY (-282 bps QoQ) on the back of improving product mix, benign commodity prices and various cost cutting measures despite negative operating leverage and no price increases taken during the quarter. RM cost as % of sales decreased 185 bps while Operating & Manufacturing Expenses decreased 268 bps while employee expenses as % of sales increased 327 bps.
Outlook
We Recommend HOLD with a revised fair price estimate of INR 1249 in 12-18 months, 15.5x its FY22E EPS.
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