Escorts Microsec 230514

8/12/2019 Escorts Microsec 230514

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Microsec Research1st May 2014

We rate Escorts (Escorts) Limited a BUY. Escorts was incorporated in the year 1944 Escorts Agents. It has played a pivotal role in the agricultural growth of India for over fivedecades. One of the leading tractor manufacturers of the country, Escorts offers acomprehensive range of tractors, more than 45 variants starting from 25 to 80 HP. Escort,Farmtrac and Powertrac are the widely accepted and preferred brands of tractors from thehouse of Escorts. A leading material handling and construction equipment manufacturer, thecompany manufactures and markets a diverse range of equipment like cranes, loaders,vibratory rollers and forklifts. The company today is the world's largest Pick 'n' CarryHydraulic Mobile Crane manufacturer.

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Investment Highlights

Stable government-positive for the company: The focus on Agriculture and mechanizatioof farm sector is on the agenda of the new government and we expect that the newgovernment would lead to the development of the Agriculture and construction sectors as awhole. We expect that the higher Agri and construction activities result in the higher needof the tractors and agri equipments in the days to come. Higher revenue and betterrealizations would improve the margins of the company and boost the financials. The stablegovernments focus on Agriculture and construction sectors may also benefit of thecompany.

Strong Revenue growth in December 2013 Quater: The Company has shown robust growin Revenue during the quarter ended December, 2013. Revenue of the company has grownby 12.78% to INR1160 crore in comparison to INR1028 crore. EBITDA of the companyimproved from INR53 crore to INR71 and PAT improved from INR28 to INR60 on back thehigher tractors sales. Expansion plans: Escorts is doubling the capacity of its Rudrapur plant. Escorts areexpanding our Rudarpur plant and would double its production capacity. Escortsmanufacture shock absorbers and struts at Rudarpur at Udham Singh Nagar in Uttrakhand.The installed capacity is to manufacture 1.5 lakhs shock absorbers per month and it would beexpanded up to 5,00,000 numbers per month. The Company is also scouting for new marketsglobally. The company started exporting tractors to Australia. The company exports itstractors to European markets and Latin America.

Escorts Ltd

BUY Sector Automobiles Tractors

oj Singh ail ID [email protected]

t Market Price (INR) 130Price 193

e Potential 48%ek High/Low (INR) 145/60t Capitalization (In INR Cr.) 1,652

Market Data

81.54

91.54

01.54

11.54

21.54

31.54

41.54

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erio

CLOSE(Escorts Ltd) CLOSE(SENSEX)

Code 500495Code ESCORTSmberg Ticker ESCO INers Ticker ESC.BOValue (INR) 10.00y Share Capital (In INR Cr.) 119.27 vs Sensex 1.28

STOCK SCAN

omoter

andomoterGroup1.97%

%

DII18%

Others48.97%

h reholding

Notes- *Financial year ended Sep, consolidate and EPS is base on no of equity share 11.93


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Valuation

At the CMP of INR130, the stock is trading at a P/E of 8x its FY14E EPS of INR16.28 and 6.5x

its FY15E EPS of INR19.94. The company has sound business model and ROE is expected topick up. We assign a P/E multiple of 9.7x to its FY15E EPS to arrive at a Target price ofINR193 for a time period of 12 months.

Key Concern

Slowdown Economic is the key risk to the company.

Lower Tractors sales may impact the companys profitability.

Insufficient monsoon


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The investments discussed or recommended in this report may not be suitable for all investors. Investors should use this research as one input into formulatian investment opinion. Additional inputs should include, but are not limited to, the review of other. This is not an offer (or solicitation of an offer) to buy/sell securities/instruments mentioned or an official confirmation. Microsec Capital Limited is not responsible for any error or inaccuracy or for any losses sufferedaccount of information contained in this report. This report does not purport to be offer for purchase and sale of share/ units. We and our affiliates, officdirectors, and employees, including persons involved in the preparation or issuance of this material may: (a) from time to time, have long or short positionsand buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokeraor other compensation discussed herein or act as advisor or lender I borrower to such company (ies) or have other potential conflict of interest with respectany recommendation and related information and opinions. The same persons may have acted upon the information contained here. No part of this matermay be duplicated in any form and/or redistributed without Microsec Capital Limited prior written consent.

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