Escorts hits over 2-month high ahead of Q4 results; stock up 18% in 6 days

Analysts believe outlook for the tractor industry for FY21 is positive with better Rabi sowing, higher reservoir levels and adequate financing availability

Shares of Escorts hit an over two-month high of Rs 819, surging 7 per cent, on the BSE on Wednesday ahead of the company's January-March quarter results (Q4FY20) results scheduled for tomorrow. The stock was trading at its highest level since March 6, 2020.

The board of directors of the company is scheduled to meet on Thursday, May 14, 2020, to consider audited financial results for the quarter and year ended March 31, 2020. The board will also consider the payment of dividend for the fiscal, if any.

The stock of the tractor manufacturer has rallied 18 per cent in the past six trading sessions after it received permission from the government authorities to resume its operations in single shift at all its plants at Faridabad for pre-defined workforce and after observing all safety guidelines issued by the government. In comparison, the S&P BSE Sensex has gained 1.5 per cent during the same period.

Analysts expect Escorts to deliver decent performance due to better volume witnessed by the tractor industry. They believe outlook for the tractor industry for FY21 is positive supported by better Rabi sowing, higher reservoir levels and adequate financing availability.

However, the Covid-19 outbreak can be a risk if it persists for long, they say. Last month, the India Meteorological Department (IMD) announced that it expects monsoon rainfall to be normal this year.

“Good rainfall season, higher Rabi sowing, high reservoir levels and adequate financing availability have been supporting customer sentiments. Most states are witnessing growth, and the momentum is expected to continue. However, channel checks indicate that the Covid-19 outbreak can be a risk, if it persists,” analysts at Emkay Global Financial Services wrote in their recent report.

Kotak Institutional Equities, on the other hand, expects Escort’s revenues to decline by 21 per cent year on year (YoY) in 4QFY20 led by 20 per cent YoY decline in tractor volumes to 20,000 units. They also expect 41 per cent YoY decline in revenues in the construction segment to be partly offset by 2 per cent YoY revenue growth in the railway segment driven by a robust orderbook.

At 01:31 pm, Escorts was trading 6 per cent higher at Rs 814 on the BSE, as against a 2.1 per cent rise in the S&P BSE Sensex. A combined 5.3 million shares have changed hands on the counter on the BSE and NSE till the time of writing of this report.