6 ESCORTS share price target reports by brokerages below. See what is analyst's view on ESCORTS share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
We downgrade Escorts to ADD, after the stock has more than doubled from its COVID lows (+35% from our initiation). The fund infusion from Kubota has been completed, and demand has revived led by good monsoons/encouraging kharif sowing. However, valuations are now trading well over mean P/E levels and are factoring in the near-term positives, in our view. We await detailed timelines for integration with Kubota’s global operations and set a revised target price of Rs 1,200 at 16x Jun-22 EPS.
Escorts has a healthy B/S with ~Rs 1000 crore of cash on books as of FY20 and ~ Rs1000 due to be received from Kubota in near term (FY21E). However, we await clarity on cash utilisation before upgrading the stock. Hence, we maintain HOLD on the stock valuing Escorts at Rs 860, using SOTP method, assigning 15x multiple to core FY22E EPS of Rs 50.3 and ascribing 25% holding company discount to its treasury shares in books.
We have tweaked our FY21 estimates slightly on account of the lockdown and likely stop-start situation in Q1FY21, but expect strong performance in H2FY21 and FY22. We retain BUY on this stock and value it at 12X FY22E EPS of Rs73.5, with a Target Price of Rs 882, a 29% upside from CMP. We expect this stock to get rerated and command premium valuations as certainty returns in a post-COVID world.
We are enthused by Kubota’s entry as a strategic investor in Escorts, especially given its leadership in the farm implement space. Kubota brings a global presence, significant technological prowess and production excellence. However, we await cash utilisation plans at Escorts before any meaningful change in stance on the company. We are constrained by limited dividend payouts by Escorts in the past with no firm outlook, going forward. We value Escorts on an SOTP valuation basis and maintain our HOLD rating on the stock with a revised target price of Rs 715.
We expects the trend of underperformance in south and west region to witness some respite owing to record level improvement in reservoir level . The Initial pick up in volume looks demanding for H2FY20, considering the rise in food inflation and government action towards rural development. However, in view of early cyclical reversal we rollover our valuation to FY22 and value EL at 14x FY22E EPS and upgrade our rating to Accumulate with a target price of Rs695.
At Escorts, we expect sales and PAT to grow at a moderate CAGR of 1.9% and -1.0%, respectively, in FY19-21E. We believe anticipated volume slowdown in tractor segment will arrest growth momentum, with margin profile expected to recover at a sedate pace. We value the company at | 430 i.e. 8x FY21E EPS of Rs 53.4/share (adjusted for treasury shares which amount to ~27% of issued capital) with a REDUCE rating on the stock.
We expect ESC’s tractor volume to grow by 5% YoY in FY20E and fall by 7% YoY in FY21E. We reduce our construction equipment volume estimate by 8%/17% for FY20E and FY21E, respectively. We lower our revenue and EBIDTA estimates by 0.4%/2.4% and 5%/6% for FY20E/FY21E, respectively. Accordingly, we cut our EPS estimates by 10%/11% for FY20E/FY21E. In view of likely down-turn for tractor industry, slowdown in construction equipment segment along with poor visibility on tractor volume performance, we reiterate our REDUCE recommendation on ESC with a revised Target Price of Rs600 (from Rs760 earlier), valuing it at 11.5x FY21E EPS.
The management expects the trend of outperformance in North and Central region to continue in FY20e as the reservoir level are low in Maharashtra and South. The guidance for tractor growth is given at 5-8% considering the fact of high base in FY19 and lower water level. However we believe that the current valuation is justifiable on the back of 13% earnings growth over FY19-21E and massive government push. We value EL at 13x FY21E EPS with a revised target price of Rs643 and upgrade our rating from Hold to Accumulate.
We expect ESC’s tractor volume to grow by 5% YoY in FY20E and fall by 7% YoY in FY21E. Therefore, we reduce our tractor volume estimates by 1% and construction equipment volume by 3% each for FY20E and FY21E. We lower our revenue and EBIDTA estimates by 2%/3% and 4%/6% for FY20E/ FY21E, respectively. Accordingly, we cut our EPS estimates by 4%/6% for FY20E/FY21E. Valuing the stock at 13x FY21E EPS, we downwardly revise our Target Price to Rs760 from Rs875 earlier. In view of expected down-cycle for tractor industry, likely slowdown in construction equipment segment, margin pressure and recent price run-up, we downgrade our recommendation on ESC to REDUCE from BUY owing to unfavourable risk reward at current valuation.
On a consolidated basis, the stock at Rs 644 is trading at a PE multiple of 10.9x FY20E (post adjustment for treasury shares) and an EV/EBIDTA of 9.2x FY20E. Escorts earnings growth of 23% over FY18-20E is among the best among auto OEM’s, which would be largely driven by 11% volume growth in tractors over the next 2 years. We value Escorts at Rs 825 per share by applying 14.0x P/E to its consolidated FY20E EPS of Rs 59. We advise investors to ACCUMULATE the stock with a target price of Rs 825 per share.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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