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Escorts Ltd expects the construction equipment segment to grow by high single-digit on a yoy basis in FY22E and expects margin improvement to continue.
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Escorts Ltd
- We believe the tractor industry is likely to show strong growth over the next two years led by good monsoons over the past two years, stable crop prices and higher Rabi crop output than the previous year and higher mix of non-agricultural-based tractors.
- We expect Escorts’ tractor volumes to grow at 6% compound annual growth rate (CAGR) over FY21-24E
- The company expects the construction equipment segment to grow by high single-digit on a yoy basis in FY22E and expects margin improvement to continue. For the railway division, the company has guided for lower double-digit growth on a yoy basis and operating margins in the range of 16-18% in FY22E.
- With revival in the economy and government spending, we expect construction equipment and railway segment revenues to grow by double-digit compound annual growth rate (CAGR) over FY22-23E.
- As of March 2021, net cash stood at ~Rs2970 cr versus ~Rs2700 cr as of December 2020 and net cash levels of Rs310 cr as of March 2020. We value the stock at 17X March 2023E EPS.
Note:
The above is a brief note on the company, based on the inputs of KIE research report dated 14th May 2021, which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental. Disclaimer:
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Lakshit Financial is Authorized Person of Kotak Securities Limited in cash segments of BSE & NSE and NSE F&O segments with NSE. Lakshit Financial registration number: BSE CASH AP0106730124228 | NSE CASH AP029177621 | NSE F&O AP029177621. Lakshit Financial Registered Office: ASM 7, Ashwin Sector, Mumbai Agra Highway, CIDCO, Nasik 422009, Maharashtra, India. Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. SEBI Registration No. INZ000200137 (Member of NSE, BSE, MSE, MCX & NCDEX). Member Id: NSE-08081; BSE-673; MSE-1024; MCX-56285; NCDEX-1262. AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL-23-97.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please refer the Risk Disclosure Document issued by SEBI and go through the Rights and Obligations and Do's and Dont's issued by Stock Exchanges and Depositories before trading on the Stock Exchanges.
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