Analyst Corner: Maintain ‘buy’ on Escorts, revised TP at Rs 1,350

The company’s ECE division posted a top line of Rs 322 crore, up 53.3% yoy, against Rs 210 crore reported in Q4FY20. The volumes stood at 1,604 units.

By Axis Securities

Escorts reported a good set of numbers in Q4FY21 and stood marginally above our estimates. Escorts’s total revenues stood at Rs 2,211 crore in Q4FY21 (our estimate: Rs 2,151 crore, higher by 2.8%) as against Rs 1,381 crore in Q4FY20, a growth of 60% yoy. This was led by 62% yoy volume growth in tractors and ~47% yoy improvement in the construction equipment (ECE) and the railway equipment division (RED) revenues.

EBITDA came in at Rs 345 crore (our estimate: Rs 333 crore) as compared to Rs 364 crore reported in Q3FY21, a de-growth of ~5%qoq. EBITDA margin stood at 15.6% (contraction of 245 bps qoq) in line with our estimate of 15.5%. The margins contracted on account of the adverse impact of rising commodity prices.

The company reported PAT of Rs 271 crore (our estimate: Rs 260 crore, higher by 4.5%) as compared to Rs 140 crore in Q4FY20, a growth of 93% yoy. The company’s ECE division posted a top line of Rs 322 crore, up 53.3% yoy, against Rs 210 crore reported in Q4FY20. The volumes stood at 1,604 units.

The RED posted a top line of Rs 146 crore as against Rs 108 crore in Q4FY20. At end of March 2021, the division’s order book stood at over Rs 340 crore that would get executed in the next 6-8 months. We maintain our ‘buy’ rating on the stock and value the company at 15x (from 17x earlier) FY23E P/E to arrive at a revised target price of Rs 1,350/share (from Rs 1,600/share earlier) on account of near-term headwinds and a moderate growth outlook.