Escorts Ltd is a strong buy

Escorts Limited is one of India’s leading engineering conglomerates, with over six decades of experience. It has helped accelerate India’s socio-economic development through its presence across the high growth sectors of agri machinery, construction and material handling equipment and railway equipment. The company has diversified businesses in three different segments—Escorts Agri Machinery, Escorts Construction Equipment and Railway Equipment division. It manufactures equipment for the agriculture, infrastructure and railway sectors for both national and international markets. The company is fully committed to transforming lives in the agri space by leveraging the power of technology. Escorts has been partnering the country’s journey towards economic prosperity and inclusive growth, with a strong focus on empowerment from the grassroots. Across the three core businesses in which it operates, the company brings the best that the world has to offer to India and take India’s best capabilities to the world. Escorts Limited reported a profit of Rs 102.7 crore for the quarter ending 30 September 2018, up by 32.4% as against a profit of Rs 77.6 crore in the corresponding period last fiscal. Revenue from operations was up by 15.4% to Rs 1,398.4 crore for the quarter ended September 2018 as against Rs 1,211.7 crore in the corresponding period of the last financial year. All the three segments of the company have done well, with the Escorts Agri Machinery segment reporting tractor volumes up by 3.3% at 21,039 units and EBIT margins higher by 14.7% for the September 2018 quarter. In the construction equipment segment, sales went up by 36.0% at 1,331 units as against 972 units for the second quarter of the current financial year. The railway product division reported revenue sales going up by 44.5% at Rs 106 crore, as against Rs 73.3 crore in the corresponding quarter of the last fiscal.

Escorts Agri Machinery has been a pioneer in farm mechanisation for the last seven decades and committed to enhancing India’s agricultural productivity by adding value to the farmer’s life. The company provides technologically superior range of 12 HP to 75 HP tractors, Farmtrac and Powertrac. Escorts has a network of over 800 customer points and four manufacturing plants in Faridabad, Haryana. The company’s shared service platforms like crop solutions and technology aggregation have been foraying well in the customer demand and help mechanising farming nationally and elevate advanced agricultural practices. Escorts has an order book of around Rs 275 crore in the railway business as of date, which almost addresses the next one year’s revenue target for this business. It is looking at about 20%-plus growth in the railway business for the current year and also expecting a similar growth going forward for the next couple of years. The agri machinery segment has registered a strong growth of 56% with sales of over 8,000 tractors till November 2018. All the three divisions are doing very well and analysts and fund managers are bullish on the company to perform strong growth over the next few years. The Escorts Ltd stock has been quoting at Rs 625 on the Indian bourses and is a strong fundamental buy for a price appreciation of 23% in the next one year.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.