Shares of Escorts Kubota Limited (EKL) are in focus after the company's analysts and investors meeting at the Faridabad facility.
Notably, the stock has delivered multibagger returns to its long-term shareholders as it has zoomed over 3,500 per cent in the last 10 years.
Anand Rathi expects it to grow more than in the past and much better than its peers.
It plans to be a challenger in its core domestic tractors, it said. "A global sourcing opportunity of $500m, robust export momentum, and good growth trajectory in other businesses make us re-visit valuations," it added.
Of tractor OEMs in India, EKL is probably the only one with a different growth trajectory, it said while sharing a target price of Rs 2,356 for the stock.
According to Prabhudas Lilladher, EKL’s major focus areas will be improving market share in domestic as well as export markets, jointly creating specialized products for the world, and ensuring quality assurance through Kubota Production System (KPS) and strategic sourcing.
Emkay Global expects Escorts Kubota to clock 20% revenue CAGR in the next 5 years, backed by: enhanced market presence in the domestic tractor market, with the expansion of the product portfolio, especially in wetland applications; improved market positioning in Construction Equipment (CE) on the widening of the product portfolio, especially in excavators; increased exports by leveraging Kubota’s global distribution network; and commencement of component exports to meet Kubota’s global requirements.
It has a 'Buy' rating on the stock with a target price of Rs 2,450 per share (Rs 2,500 earlier).
However, in the near term, Motilal Oswal believes that uncertainty in the tractor cycle would continue, led by an anticipation of a sharp inventory correction in the third quarter and the adverse impact of the implementation of TREM-4 norms for >50HP tractors from Jan-23.
This, along with a high base of FY23, would keep volume growth under check in the foreseeable future.
It added that a faster recovery in other businesses and a ramp-up in its partnership with Kubota would dilute the impact of a weaker Tractor cycle on Escorts.
"While the tractor cycle seems to be uncertain, the valuations are already reflecting volume recovery as well as the benefit of the Kubota partnership. We reiterate our Neutral rating with a target price of Rs 1,875," the brokerage house said.
Sharekhan believes that Escorts Kubota is well poised to gain market share in India and globally, driven by new product launches, increased share of non-agricultural-based tractors, growing global footprints, and being the beneficiary of the single exclusive vehicle of Kubota in India.
It further added that the company has a healthy balance sheet with zero debt, strong free cash flow, and a decent ROCE profile of 17-22 per cent.
At 12:06 hours, the shares of Escorts Kubota Limited were trading 0.17 per cent lower at Rs 2,203 on BSE. The market cap of the firm fell to Rs 29,066.52 crore.
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