Escorts Kuborta slips 5% on weak Q3 operational performance; buy or sell?

Escorts Kuborta shares slipped 5.3 per cent on Tuesday, logging an intraday low at Rs 3,130 per share on BSE. The selling pressure came after the company reported Q3 results. 

 

Around 10:28 AM, Escort Kubota share price was down 3.4 per cent at Rs 3,193 per share on BSE. In comparison, the BSE Sensex was down 0.44 per cent at 76,975.14. The market capitalisation of the company stood at Rs 35,722.57 crore. The 52-week high of the stock was at Rs 4,422 per share and the 52-week low was at Rs 2,670.75 per share. 

 

On Monday, after market hours, Escorts Kuborta reported a rise of 10 per cent in consolidated net profit year-on-year (Y-o-Y) to Rs 320.64 crore as compared to Rs 290.51 crore. Its revenue for the quarter under review increased 7.8 to Rs 2,940.02 crore as compared to Rs 110.34 crore a year ago. 

 

The company earnings before interest, tax, depreciation, and amortisation (Ebitda) for the third quarter stood at Rs 335.3 crore, up 3.6 per cent as against Rs 323.8 crore in the corresponding quarter a year ago. Ebitda margins stood at 11.4 per cent, which was down 60 basis points (bps) Y-o-Y from 11.9 per cent. 

 

As per Motilal Oswal, operational performance disappointed as Ebitda margin declined due to an unfavorable mix and low average selling price (ASP). 

 

The brokerage maintained a 'Neutral' rating on the stock and continued with a target price of Rs 3,295 per share as it reckons that the stock is trading at a premium of 32x FY25E/27x FY26E earnings per share (EPS), compared to its 10-year average of 18x.

 

Axis Securities maintained 'Hold' but raised the target price to Rs 3,420 per share from Rs 3,290.  

 

The brokerage remains positive on company's long-term fundamentals – strong cash flow generating capabilities and greenfield expansion projects. However, synergy benefits with Kubota in agribusiness are expected to take longer than estimated earlier due to a slowdown in international markets. 

 

In the past one year, Escorts Kubota shares have gained 18.6 per cent against Sensex's rise of 8.7 per cent.