ICICI Direct has given Hold recommendation for Escorts with a target price of Rs. 1840 in its research report issued on May 16, 2022

ICICI Direct’s research report on Escorts

Escorts is a prominent tractor maker domestically (10.3% FY22 market share) and also serves the domestic construction equipment, railways space. FY22 sales mix – tractors 77%, construction equipment 14%, railways 9% • Past five year CAGR: 24.1%, 35.6% in EBITDA, PAT; cash positive b/s.

Outlook

We retain HOLD rating on Escorts amid muted tractor growth prospects over FY22-24E & await contours of medium term business growth plan constructed by both parties (Escort & Kubota – the new co-promoter). We value Escorts at SOTP-based target price of Rs 1,840 (20x P/E on core FY24E EPS, 25% discount on treasury shares).

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