Pick of the Week

19th April, 2024

Escorts Kubota Ltd.

BSE: 500495 | NSE: ESCORTS

Recommendation Time Period Current Price Target Price Potential Upside

BUY 12 months 3,121.0/- 3,589.2/- 15.0%

Escorts Kubota Ltd is one of India’s leading tractor manufacturers specializing in farming and construction equipment
dssd
manufacturing. The company has over seven decades of experience in manufacturing and sale of agri-machinery,
construction and material handling equipment, and railway equipment.

Five reasons to buy:

 One of the leading engineering companies with deep industry experience: Escorts is among the frontrunners
in India’s tractor manufacturing industry with a wide portfolio ranging from 12 HP to 120 HP. The company has
6 manufacturing plants (excluding JVs and subsidiaries) out of which 3 plants are for tractor manufacturing with
a capacity of over 1.2 million units per annum. It is also one of the largest pick-and-carry hydraulic mobile crane
players in the domestic market with a capacity of 10,000 units. It also manufactures brake systems, couplers,
suspension systems, shock absorbers, and rail fastening systems for railways.
 Deep penetration through extensive reach: The Company, in addition to India, also exports its products to 63
countries. It has 1,200+ dealers with a pan India presence. The company is continuously taking initiatives to
grow its presence in the Southern and Western markets of the country, thus establishing itself as a truly pan-
India player.
 Synergies with joint promoter Kubota Corporation: Escorts and Kubota Corp. has further strengthened their
partnership with Kubota Corp. increasing its stake to 44.8% in Jun’22 quarter and becoming a joint promoter of
the company along with the existing promoters. Kubota Corp is a global manufacturing company that specializes
in manufacturing agriculture, water, and other products with a worldwide network. This collaboration will
provide higher growth opportunities in terms of enhanced R&D facilities, advanced technologies, capacity
expansion and growing presence in export market. The synergies will improve further with the amalgamation of
the marketing arm of Kubota with Escorts Kubota Ltd.
 Attractive valuation: At CMP of Rs. 3,121.0, the stock trades at FY24E/25E P/E of 33.5x/28.5x based on
consensus Bloomberg earnings estimates. The IMD has predicted an above normal monsoon for India in 2024
which is likely to improve the farmer sentiment and improve the tractor and farm equipment volumes.
Key Risks: Erratic monsoon; Volatile raw material costs
Pick of the Week

Financial Summary

Particulars (Rs cr) FY22A FY23A FY24E FY25E

Net Sales 7,283 8,429 8,958 10,274

EBITDA 966 770 1,183 1,368

Adj. Net Profit 736 637 1,035 1,216

EBITDA Margin (%) 13.3 9.1 13.2 13.3

RoE (%) 11.7 8.1 11.8 12.4

P/E (x) 47.0 54.4 33.5 28.5

P/BV (x) 4.6 4.2 4.0 3.5

Source: Bloomberg, SSL Research

Stock Performance (2-Year) – Indexed to 100

240

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90

60
May'22

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Apr'24

Escorts Kubota Ltd BSE 500

Source: ACE Equity, SSL Research

Recommendation History
Date Stock Price Target Price Recommendation Status
NA NA NA NA NA
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Name Qualification Designation

Sudeep Shah MMS-Finance DVP- Technical & Derivative Research
Sunny Agrawal B.E, MBA (Finance) DVP - Fundamental Research
Rajesh Gupta PGDBM (Finance), MA (Bus. Eco) AVP - Fundamental Research
Monica Chauhan C.A. Research Analyst - Equity Fundamentals
Harsh Vasa C.A. Research Analyst - Equity Fundamentals
Sumeet Shah B.E., CFA Research Analyst - Equity Fundamentals
Sweta Padhi MBA (Finance) Research Analyst - Equity Fundamentals
Gautam Updhyaya MBA (Finance) Research Analyst - Equity Derivatives
Vinayak Gangule BE (IT) Research Analyst - Equity Technicals
Pratik Patni BSc (Biotech Entire) Research Analyst- Equity Derivatives
Ghanshyam Gupta MBA (Finance) Research Analyst – Currency Derivative
Sagar Peswani B.Tech (ECE) Research Associate - Equity Technicals
Uday Chandgothia BE, MBA (Finance) Research Associate - Equity Fundamentals
Kalpesh Mangade B.Com MIS Analyst - Retail Research

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