Tractor industry outlook subdued: HSBC Research picks M&M, Escorts Kubota stocks; shares price targets
Maintaining a buy call on M&M, the brokerage cut tractor volume estimates for M&M and Escorts Kubota by 5-7% for FY27 and FY28.
- Feb 26, 2026,
- Updated Feb 26, 2026 4:03 PM IST
The outlook of the tractor industry is subdued, mainly due to the anticipated El Nino effect, says HSBC Global Investment Research. Despite the weak monsoon outlook, water reserves and replacement demand are supportive for the Indian economy.
The global brokerage picked M&M and assigned a price target of Rs 4150 against the earlier Rs 4250. Maintaining a buy call on M&M, the brokerage cut tractor volume estimates for M&M and Escorts Kubota by 5-7% for FY27 and FY28. On Escorts Kubota, the brokerage has a hold call with a reduced price target of Rs 3600 against the earlier Rs 3700.
Commenting on the impact of reduction in tractor volumes, the brokerage said due to a robust growth in the auto business, it should have only a limited negative impact on EPS. The brokerage sees potential upside risks from a weaker El Nino or increased government subsidies to its projections.
The northern region, accounting for 35% of total tractor sales, is best positioned against El Nino risks. However, M&M has weaker market share in the North. Hence, a strong El Nino could see it losing some market share.
However, the brokerage is optimistic on the long-term outlook for tractor sales.
The five-year rolling CAGR remains in the 4-6% range. With 11 million tractors in India, penetration is 7% of total land parcels and 47% of eligible households (those with over 2 hectares), indicating further growth potential. Replacement demand constitutes 45% of total sales, the brokerage said.
Commenting on the reservoir levels, which plays a significant role in agricultural production, the brokerage said they were well above the long-term average: North (+42%), West (+34%), South (+26%), Central(+22%), and East (+2%).
Meanwhile, M&M shares ended 0.21% lower at Rs 3484.05 in the current session against the previous close of Rs 3491.50. Escorts Kubota stock closed 0.33% lower at Rs 3585 .
The outlook of the tractor industry is subdued, mainly due to the anticipated El Nino effect, says HSBC Global Investment Research. Despite the weak monsoon outlook, water reserves and replacement demand are supportive for the Indian economy.
The global brokerage picked M&M and assigned a price target of Rs 4150 against the earlier Rs 4250. Maintaining a buy call on M&M, the brokerage cut tractor volume estimates for M&M and Escorts Kubota by 5-7% for FY27 and FY28. On Escorts Kubota, the brokerage has a hold call with a reduced price target of Rs 3600 against the earlier Rs 3700.
Commenting on the impact of reduction in tractor volumes, the brokerage said due to a robust growth in the auto business, it should have only a limited negative impact on EPS. The brokerage sees potential upside risks from a weaker El Nino or increased government subsidies to its projections.
The northern region, accounting for 35% of total tractor sales, is best positioned against El Nino risks. However, M&M has weaker market share in the North. Hence, a strong El Nino could see it losing some market share.
However, the brokerage is optimistic on the long-term outlook for tractor sales.
The five-year rolling CAGR remains in the 4-6% range. With 11 million tractors in India, penetration is 7% of total land parcels and 47% of eligible households (those with over 2 hectares), indicating further growth potential. Replacement demand constitutes 45% of total sales, the brokerage said.
Commenting on the reservoir levels, which plays a significant role in agricultural production, the brokerage said they were well above the long-term average: North (+42%), West (+34%), South (+26%), Central(+22%), and East (+2%).
Meanwhile, M&M shares ended 0.21% lower at Rs 3484.05 in the current session against the previous close of Rs 3491.50. Escorts Kubota stock closed 0.33% lower at Rs 3585 .