Escorts hits record high on heavy volumes

The stock moved higher to its record high of Rs 415, up 8% on the BSE

Escorts moved to its record high of Rs 415, up 8% on the BSE, on back of heavy volumes in otherwise weak market. The stock surpasses its previous high of Rs 414 touched on October 4, 2016 during intra-day trade.

At 03:04 pm; the stock was up 7% at Rs 411 as compared to 0.59% decline in the S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 5.60 million shares representing 4.6% of total equity of Escorts have changed hands on the NSE and BSE so far.

During the October-December (Q3FY17) quarter, Escorts tractor volumes correspondingly up by 27.4% to 16,963 units on year on year (Y-o-Y) and sequentially up by 9.6% on quarter on quarter (Q-o-Q). Construction volume correspondingly up by 16.8% to 815 on Y-o-Y and sequentially up by 12.6% on Q-o-Q.

EBITDA (earnings before interest, tax, depreciation and amortization) margin at 8.4% correspondingly up by 378 bps on Y-o-Y and sequentially up by 147 bps on Q-o-Q.

Escorts’ 23% year to date (ytd) tractor volume growth, more than 25% ytd growth in its construction-equipment volumes and hopes of a rural recovery offer assurance of strong earnings growth.

“The Union Budget’s agricultural and highway focus would have a positive impact on farm income, the rural economy and infrastructure development, throwing up opportunities and fostering further investments,” said analyst at Anand Rathi Share and Stock Brokers and retain ‘buy’ rating on the stock with target price of Rs 450.

“Apart from the growth in tractor segment, recovery in construction equipment business and the opportunity which persist in the rail-way segment are likely to compliment overall growth. Additionally, cost cutting Initiatives such as VSR to employees, vendor rationali-zation and value engineering are likely to boost margins,” according to analyst at Indsec Securities and Finance.