Tractor volumes show record growth, Momentum expected to continue: Escorts
Update on Indian Equity Market:
After yesterday’s rout markets traded flat to end the day as Nifty closed the day 45 points lower at 14,683. Within the index, ADANIPORTS (+12.6%), TATACONSUM (+4.6%), and ASIANPAINT (+4.0%) were few of the gainers while POWERGRID (-2.3%), GRASIM (-1.3%), and EICHERMOT (-1%) led the losers. Among the sectoral indices, PHARMA (+1.8%), METAL (+1.4%), and REALTY (+1.2%) led the winners while BANK (-0.5%), PRIVATE BANK (-0.4%), and MEDIA (-0.3%) led the losers.
Excerpts of Interview with Bharat Madan, Group CFO of Escorts Ltd. with CNBC-TV18 dated 5th April 2021:
- Escorts posted very strong 10 percent tractor sales growth in March compared to the previous month. FY21 ended on a strong note with total tractor sales rising 24 percent vs FY20.
- Escorts achieved an annual production level of 100,000 units for the first time in its history on the back of robust growth in sales despite the Covid-19 pandemic.
- The rural sentiment is expected to be strong after a good Rabi season and a favorable monsoon outlook.
- Demand is expected to grow for the next 6 months on account of expansion in South India.
- Rising Covid-19 cases has not yet impacted demand but remain a concern. However, it is not expected to hamper any supply-side considerations.
Asset Multiplier Comments:
- The Company is witnessing a strong demand on account of economic recovery and the company is poised to continue this upward trajectory for the upcoming 2 quarters.
- Overall, the outlook for the auto industry is favorable and the effect of supply chain issues seems to be muted so there’s scope for sustained growth.
Consensus Estimates (Source: market screener website):
- The closing price of ESCORTS was ₹ 1,223/- as of 06-April-2021. It traded at 15x/ 13x the consensus EPS estimate of ₹ 84/ 94 for FY21E/22E/23E respectively.
- The consensus price target is ₹ 1470/- which trades at 16x the EPS estimate for FY23E of ₹ 94/-
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