Escorts provide a complete range of tractors with more than 45 variants starting from 25 to 80 HP. Escorts also manufacture and markets a various variety of equipment like loaders, cranes, vibratory rollers, and forklifts.
Escorts Ltd. is one of the Multibagger Shares, identified by Dynamic Research based on technical and fundamental research.
Escorts share price has touched a 52 week high of Rs. 267.00 on 28 -Jul -2016 and a 52 week low of Rs.112.80 on 12 -Feb -2016, and is currently trading at Rs. 262.
Share Holding:
The promoters holding in the company stood at 43.01%, FII’s have increased their position from 7.58% in Jun 2015 to 8.86 % in Jun2016, DII’s have increased their position from 1.63% in Jun 2015 to 3.10% in Jun 2016.
Together FII and DII holding in the company stood at 11.96%.
Some of the Non-Promoters holding securities more than 1% of total number of shares are
- Jhunjhunwala Rakesh Radheshyam: 9.16%
- Goldman Sachs India Fund: 2.71%
- Pradeep Kumar Gupta trustee of esos-2006: 2.60%
- UTI midcap Fund: 1.36%
- Jhunjhunwala Rekha Rakesh: 1.02%
Financial Analysis
Quarterly Results
For the quarter ended June 2016, the total income from operations of Escorts Ltd. has reported a growth of 7.53 % on the Y-o-Y basis to Rs. 1051.42 cr. as against Rs. 977.74 cr. during the same quarter last year. A boost in total income from operations shows strong development in business.
The operating profit of Escorts Ltd. on standalone has shown a growth of 76.93% Y-o-Y to Rs. 73.27 cr. as against Rs. 41.41 cr. during the same quarter last year. This is mainly due to rise in top line of the company.
The net profit of Escorts has registered a growth of 29.47% Y-o-Y to Rs.46.96 cr. as against Rs 36.27 during the same quarter previous year.
Annual Results
For the year ended March 31, 2016, Escorts Ltd. on Consolidated basis reported net sales of Rs. 3537.62 cr. compared to Rs. 4112.68 cr. FY2015 declined by 13.98% YOY.
For the year ended March 31, 2016, Escorts on Consolidated basis reported the net profit of Rs. 77.06 cr. compared to the profit of Rs. 76.31 cr. FY2015, registering a very marginal growth of 0.98% annually.
Ratio Analysis
| Name | Ratio | Name | Ratio |
| Current Ratio | 1.19 | ||
| Quick Ratio | 0.77 | ||
| Dividend Yield% | 0.46 | ||
| Interest Coverage Ratio | 3.91 | ||
| Debt Equity Ratio | 0.23 | ||
| Return On Asset (%) | 3.78 | ||
| Return On Equity (%) | 4.25 |
The above ratio suggests that the company is operating at a very minimal level of debt on its shoulders, and have enough liquidity to pay its short-term obligation and can easily meet up with the interest expenses pertaining to its debt obligations. The company has reduced its interest cost from 15.21 cr. in March quarter 2016 to 11.19 cr. in June quarter 2016.
Manufacturing Capacities
Escorts Agri Machinery
Four Plants: Powertrac, Farmtrac, Components, Crankshaft & Hydraulics with a production capacity of 100,000 tractors per annum.
Poland Plant: 100 per cent subsidiary having an installed capacity of 2,500 tractors per annum.
Escorts Construction Equipment
State of the art manufacturing and assembly facility sprawling 23,226 sq.m. of space with a capacity of 10,000 units p.a.
Escorts Railway Products
State of the art manufacturing facility sprawling 14,000 sq.m. Couplers (AARH + Shaku) 1100 p.a., EP Brake 200 p.a., Brake Block: 32,000 p.a, Air Brake 4400 p.a.
Escorts Auto Products
State of the art manufacturing facility sprawling 12,500 sq.m. McPherson Struts 300,000 p.a., Front Forks; 1.0 mn. p.a.
Investment Rationale
- With the development in infrastructure, construction equipment market is expected to witness a rapid growth. It is anticipated that with the implementation of large projects, demand for specialized construction equipment will increase, which includes crawler excavators, wheeled loaders, crawler dozers, and compaction equipment.
- Escorts is the fourth largest tractor maker in India.
- Total plan expenditure for Railways during 12th five-year plan increased to USD 70 bn. from 11th five-year plan of USD 32 bn. As per the rail budget in Feb’15, Rs. 8.5 lac crore will be invested in railways in next five years. Escorts is one of the key suppliers to Indian Railways for products including Couplers, Brake Systems, Shock Absorbers, etc. – with a focus on comfort, safety, and environment. With this extensive product range and in-house R&D capabilities, Escorts is well-poised to capture the immense opportunity from the Indian Railways.
- Escorts also announced a new strategic approach of ‘global transformation vision 2020’ to strengthen its market share across continents.
- Escorts launched 13 new tractors for export markets.
- New product launches and greater presence in South & West India will aid in market share gain.
- FY15 YTD tractor volumes are 8.4% down Y-o-Y on the back of lower crop prices and erratic monsoon. This is a short term phenomenon as long term indicators remain intact. However Industry is expected to revive soon.
- Indigenously designed, India’s first Anti Lift Tractor in 35 HP and 40 HP.
- Infrastructure spend target in 12th Five-Year Plan to be about USD 1 trillion, 10% of GDP v/s 7.6% of GDP in 11th Five-Year Plan.
- Escorts Auto Products pioneered the manufacturing of automotive shock absorbers in India and has rolled out about 80 new products in last 3 years.
Over the long term, easing macro headwinds regarding lower interest rates and higher economic growth would be the key drivers for volume growth and profitability.
Investment Option
At CMP of Rs.259.45 the Escorts share price is trading at a P/E of 32.24, the market cap of the company is 3180.26 crore. As per Dynamic Levels we recommend a buy on Escorts at correction at around 245 levels which is a good weekly support (1 week low) for the stock, with a price target of Rs. 300.The recommended entry price is below current market price, as 245 is important weekly support and to keep a good Risk to Reward ratio.
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