Escorts hits 52-week high; rallies 16% in 6 days on good Q4 results

Shares of Escorts hit 52-week high of Rs 919, up 4 per cent on the BSE on Friday, in otherwise weak market on expectations that the tractors sales could recover sooner than other segments. The stock price surpassed its previous high of Rs 914.40 touched on February 19, 2020 in the intra-day trade.

The stock of the commercial vehicle maker has rallied 16 per cent in the past six trading days after the company delivered strong operating performance in the January-March quarter (Q4FY20) amid a tough environment.

The company’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) grew 2.5 per cent year-on-year (YoY) to Rs 194 crore, while Ebitda margin, adjusted for one-offs, expanded 50bps YoY to 12.1 per cent against analyst estimate of around 10.5 per cent during the quarter. Revenue, however, fell 15 per cent YoY to Rs 1,380 crore in Q4YF20 due to poor performance by construction equipment segment.

The management said good harvest, increased procurement by respective governments and their focussed support to farming and prediction of good monsoon will enable quick revival across farm ecosystem. Moreover, the management is optimistic for the forthcoming quarters and hopes that the collective efforts will help in containing the crisis and the global economy will be on its strength soon again.

Analysts at Emkay Global Financial Services believe that volumes in the tractor industry are expected to recover sooner than other segments, led by pent-up demand and a positive rural sentiment, owing to healthy Rabi output and expectations of good monsoon.

The brokerage firm expects Escorts to sustain the market share in domestic tractors ahead, led by continuation of aggressive marketing efforts, success of its dual-brand strategy – Farmtrac and Powertrac series, and focus on network expansion. Recently, the company has strengthened its tie-up with Kubota Japan, which took a 10 per cent equity stake in Escorts.