Escorts Kubota Q1 Results Review - Healthy Margins, But Limited Potential; Maintaining A Hold: Anand Rathi

Anand Rathi Report

Above our estimated Rs 3.1 billion, Escorts Kubota Ltd.’s Q1 Ebitda came flat YoY at Rs 3.3 billion on better margins across segments. We are enthused regarding the company as we believe FY25 would see a ramp-up in its execution of Vision 2028 and a turnaround in tractors.

After the stock run-up (20%) post Q4 results, considering the restricted potential, we retain a Hold rating.

Key Vision 2028 plans: new platforms for domestic/exports, component/research and development services export, operating captive finance and ramping up plans for other segments.

We expect strong, 26/28%, revenue/Ebit compound annual growth rates (including joint venture) over FY24-26 and 21/24% over FY24-28.

The stock is fairly valued and trades at 35 times/28 times FY25E/26E core price/earning.

Our Rs 4,350 target price (earlier Rs 3,700) is higher, 30 times FY26E core EPS (25 times FY26E), and Rs 468/share cash.

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