Hold Escorts, target price Rs 1275: Emkay Global

Emkay Global has hold call on Escorts with a target price of Rs 1275. The current market price of Escorts Ltd. is Rs 1194.9. Time period given by analyst is one year when Escorts price can reach defined target.

Escorts Ltd., incorporated in the year 1944, is a Mid Cap company (having a market cap of Rs 16511.17 Crore) operating in Auto sector.

Financials
For the quarter ended 31-03-2021, the company reported a Consolidated Total Income of Rs 2270.65 Crore, up 8.60 % from last quarter Total Income of Rs 2090.93 Crore and up 60.36 % from last year same quarter Total Income of Rs 1415.95 Crore. Company reported net profit after tax of Rs 270.65 Crore in latest quarter.


Investment Rationale
Despite double-digit growth in Construction Equipment and Railways, the brokerage expects overall revenue/EBITDA growth to be in single digits over FY21-24E, owing to weakness in the Agri (Tractors) segment. Retain Hold with a revised TP of Rs1,275 (earlier Rs1,240), applying a P/E of 13x on Sep’23E (earlier Mar’24E), based on the DCF model and historical mean valuations (13x). Key upside risks include a strong macro recovery, lower competition, and benign movement in commodity prices.

Promoter/FII Holdings
Promoters held 36.6 per cent stake in the company as of June 30, 2021, while FIIs held 21.3 per cent, DIIs 5.6 per cent and public and others 36.5 per cent.