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

The corporate’s ECE division posted a high line of Rs 322 crore, up 53.3% yoy, towards Rs 210 crore reported in Q4FY20. The volumes stood at 1,604 items.

By Axis Securities

Escorts reported a very good set of numbers in Q4FY21 and stood marginally above our estimates. Escorts’s whole revenues stood at Rs 2,211 crore in Q4FY21 (our estimate: Rs 2,151 crore, greater by 2.8%) as towards Rs 1,381 crore in Q4FY20, a progress of 60% yoy. This was led by 62% yoy quantity progress in tractors and ~47% yoy enchancment within the building gear (ECE) and the railway gear division (RED) revenues.

EBITDA got here in at Rs 345 crore (our estimate: Rs 333 crore) as in comparison with Rs 364 crore reported in Q3FY21, a de-growth of ~5percentqoq. EBITDA margin stood at 15.6% (contraction of 245 bps qoq) in step with our estimate of 15.5%. The margins contracted on account of the antagonistic affect of rising commodity costs.

The corporate reported PAT of Rs 271 crore (our estimate: Rs 260 crore, greater by 4.5%) as in comparison with Rs 140 crore in Q4FY20, a progress of 93% yoy. The corporate’s ECE division posted a high line of Rs 322 crore, up 53.3% yoy, towards Rs 210 crore reported in Q4FY20. The volumes stood at 1,604 items.

The RED posted a high line of Rs 146 crore as towards Rs 108 crore in Q4FY20. At finish of March 2021, the division’s order guide stood at over Rs 340 crore that might get executed within the subsequent 6-8 months. We preserve our ‘purchase’ ranking on the inventory and worth the corporate at 15x (from 17x earlier) FY23E P/E to reach at a revised goal worth of Rs 1,350/share (from Rs 1,600/share earlier) on account of near-term headwinds and a reasonable progress outlook.