ESCORTS LTD - Q1 FY 21 - RESULTS REVIEW - DT 04 11 20

 

ESCORTS LTD

Q1 FY 21 RESULTS REVIEW

DT 04 11 20

 

COMPANY OVERVIEW

 

An Overview

India's leading engineering conglomerate. For over Seven decades its presence across the high growth sectors of

•Agri-machinery (EAM)

•Construction& Material Handling Equipment(ECE)

•Railway Equipment.(RED)

manufactures and markets a diverse range of equipment like cranes, loaders, vibratory rollers and forklifts. The company today is the worlds largest Pick `n` Carry Hydraulic Mobile Crane manufacturer.

The company`s product range includes Tractors i.e.Farmtrac,Powertrac ,Escort , Engines,Implements & Trailors , Lubricants ECEL, Hydraulic Mobile Cranes ,Compactors ,Forklifts ,Articulated Boom Cranes ,Railway Equipment and Auto Component.

 

MANAGEMENT

Nikhil Nanda        Chairman & Managing Director 

Nitasha Nanda            Whole Time Director  

Shailendra Agrawal            Executive Director      

 

QUARTERLY RESULTS

 

Escorts (in Rs. Cr.)	Sep '20		Jun '20		Sep '19		YOY		QOQ
Net Sales	1,654		1,089		1,334		24.02		51.86
FINAL NET PROFIT		227		92		102		122.99		145.37
Equity		134.83		122.58		122.58		9.99		9.99
Basic EPS		23.61		10.78		11.86		99.07		119.02
Consumption of Raw Materials	991.37		414.23		873.91		13.44		139.33
Purchase of Traded Goods	127.66		71.74		104.22		22.49		77.95
Increase/Decrease in Stocks	-67.9		244.11		-86.92		-21.88		-127.82
Employees Cost	128.5		129.03		127.8		0.55		-0.41
Depreciation	28		27.08		26.74		4.71		3.4
Other Expenses	176.49		108.17		189.86		-7.04		63.16
P/L Before Other Inc., Int., Excpt. Items & Tax	270.06		94.9		98.16		175.12		184.57
Other Income	39.19		30.59		21.44		82.79		28.11
P/L Before Int., Excpt. Items & Tax	309.25		125.49		119.6		158.57		146.43
Interest	3.77		2.41		4.06		-7.14		56.43
P/L Before Tax	305.48		123.08		106.32		187.32		148.2
Tax	77.25		29.05		4.08		1793.38		165.92
Net Profit	228.23		94.03		102.24		123.23		142.72
Minority Interest	-0.35		-0.12		0.2		-275		191.67
Share Of P/L Of Associates	-1.01		-1.45		-0.7		44.29		-30.34
Diluted EPS	23.6		10.78		11.86		98.99		118.92

 

MP  1233     

PE   13.06

VOLUMES      12,85,385    

52 Wk L/H     527.1     1342.7

MONTHLY           

TECHNICAL RATING          

Very Bullish  

 

VOLUME AND SALES

•EAM at 24,441

•YoY up by 23.8%

•ECE at 821

•YoY down by 13.1%

••RED at ₹160.2 Cr.

•YoY up by 26.4%

 

ANNUAL RESULTS   

 

Annual	Mar-20	Mar-19	Mar-18	Mar-17	Mar-16
Sales	5,810	6,262	5,059	4,145	3,431
Net Profit	472	478	346	172	88
Other Income	97	92	65	47	60
Total Income	5,907	6,354	5,124	4,192	3,492
Total Expenditure	5,264	5,619	4,585	3,910	3,341
EBIT	643	735	538	281	151
Interest	17	19	29	32	51
Tax	153	237	162	77	12

 

 

CASH FLOWS	Mar-20	Mar-19	Mar-18	Mar-17	Mar-16
Operating Activities	797	-234	460	303	212
Investing Activities	-421	-17	-374	-154	-45
Financing Activities	-300	190	0	-113	-190
Others	0	0	0	0	0
Net Cash Flow	75	-61	84	36	-22

 

 

 

HISTORICAL PRICES	THEN	NOW	DIFF%
3YRS BEFO	734.95	1234.7	68
2 YRS BEFO	681.8	1234.7	81.09
1YR BEFO	646	1234.7	91.13
3 M BEFO	1103	1234.7	11.94

 

 

Type	Dividend%	Ex-Dividend date
Final	25	Aug 13, 2020
Final	25	Jul 11, 2019
Final	20	Aug 23, 2018
Final	15	Sep 07, 2017
Final	12	Sep 08, 2016

 

 

 

Share Holding Pattern in (%)
Standalone	Sep-20	Jul-20	Mar-20	Jun-19
Promoters	36.59	36.59	40.25	40.25
Pledged	0	0	0	0
FII/FPI	21.59	18.57	19.28	20.38
Total DII	21.39	22.98	15.22	10.82
Fin.Insts	0.01	0.01	0.01	0.13
Insurance Co	0.23	0.02	0.02	0.07
MF	8.29	9.02	9.94	5.34
Others DIIs	12.86	13.93	5.25	5.28
Others	20.44	21.86	25.25	28.55
Total	100.01	100	100	100

 

 

Nikhil Nanda, Chairman and Managing Director SAYS : “The Agri sector has been on an unprecedented boom. Maintaining highest safety measures and working closely with our partners to work around supply chain challenges, the demand for our tractors has so far outpaced our supplies.

We think the momentum in Agri sector will continue supported by positive macro-economic factors.  We also hope that supply chain challenges would subside after a month or so  . We have also started witnessing some positive development in the construction and railway equipment space now and hopefully we will see a full recovery soon. In all our business segments, we are optimistic for the coming quarters.”

TRACTOR SEGMENT

In Q2 FY21 on Y-o-Y domestic Industry up by ~41.4%.

•Industry in Q2 FY  21 on Y-  o-Y basis in North and central region grew by 30%, whereas industry grew by 56% in South and west region.

•Over all tractor industry sentiments are positive. We now expect FY21 domestic tractor industry to grow at low double-digit levels.

Strategic Collaboration with Kubota Update

Manufacturing JV (50,000 capacity)  : 

•Contract Manufacturing for Escorts and Kubota Product

•Production started for Kubota tractors in Q2 FY21

Kubota Global Channel for Escorts Products  :  •Escorts Products offering under Joint Branding “E Kubota” to Global market

•Export started from Q3FY20.

Joint development of new products  : 

•Both teams currently discussing same.

Preferential allotment to Kubota  :  •Transaction complete.

Escorts 40% investment into KAI

(Kubota Agricultural Machinery India Pvt. Ltd.)   :  •Transaction complete.

Served-Construction Equipment Industry Overview

•Served industry (Backhoe Loaders,Pick n carry crane and Compactors) went up by ~31% in Q2 FY21 wrt to LY.

•In Q2 FY21 BHL industry up by 44%, compactor up by 47%  and Cranes industry down by 20%.

 

•Key Highlight

•Served industry up by 31% in Q2FY21 wrt to LY.

 •YoY

•BHL industry up by 44%.

 •Crane industry down  by 20%

•Compactors industry up by 47%.

SERVED INDUSTRY MARKET SHARE

• Q2: Crane market Share 36.5%

• YoY down by ~347 bps

CRANE :36.5%

COMPACTOR : 10%

BHL : 1.3%

REVENUE

Q2: ₹156.9 Cr.

• YoY down by 21.9%

• QoQ up by 199%

CRANE :61%; COMPACTOR :10%;

BHL : 17%; TRADED+SPARE : 13%

 Highlights
- Escorts’ tractor segment saw a superlative performance with double-digit growth in volume and revenue
- The tractor segment’s margin expanded significantly due to softening of raw material prices, a rich product mix and operating efficiencies
- Construction equipment and railway segments also picking up pace
- Outlook for tractors is positive for the medium to long term
- Valuations at fair levels, accumulate on dips for the long term

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Outlook

Tractor demand promising

Escorts generates more than 80 per cent revenues from tractors and most of the demand is from rural areas. These areas are the least affected by Covid-19 and, hence, the demand pick-up has been sharp after the lockdown restrictions were eased.

Further, the overall tractor demand sentiment continues to be very positive. The management has highlighted that the demand is driven fundamentally by the rural sector — higher crop production, good crop prices, sufficient availability of water and easy availability of finance. They expect demand momentum to continue and expect the domestic tractor industry to register a low double-digit growth in FY21. We believe that it is well positioned to outperform the industry growth.

Though Escorts lost market share in the quarter gone by, the management has highlighted that supply constraints are almost gone and the company will be able to maintain its market share going forward.

In terms of profitability, the management highlighted that, going forward, the current margin is not sustainable as commodity prices have started inching up. The company is, however, confident that it will be able to register a margin to the tune of 15-16 per cent.

Construction equipment and railway segments to take time to recover

A slowdown in economic activity due to Covid-19 dampened the outlook for the CE segment. Demand recovery in this segment is likely to be slow.

The management highlighted that the railway segment is expected to do well on the back of a rising order book for rail modernisation. However, that is expected to impact operating margins adversely due to higher import content.