Escorts share price today: Farming and construction equipment-maker Escorts share price closed yesterday at Rs 1233, up Rs 17 or 1.4%. In his technical analysis on Escorts, Avinash Gorakshkar, Director Research at ProfitMart Securities said that since the last 2 months Escorts price is consolidating Rs 1200-Rs 1400 and not doing much but in this process is forming a nice flag pattern on a weekly basis. Support level is Rs 1200-Rs 1180, below which stop-loss will get executed. He is expecting that the stock will take support at this level and continue to further consolidate. Upside only seen only above Rs 1400, says Avinash

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So, how is Escorts performing and what does IIFL Securities have to say about it? Know here:

IIFL Securities has initiated coverage on Escorts with an ADD rating and target price of Rs 1470. The tractor industry, which clocked an exceptional volume growth of >25% in FY21, may continue growing even in FY22, albeit at a lower rate. However, industry profitability (% margin and Ebit/tractor) may come off in FY22 due to multiple factors. As a result, tractor industry earnings growth is likely to be subdued.

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IIFL Securities says that it expects Escorts to outperform, with market-share gain in domestic tractors and high growth in exports. IIFL Securities said it found that Escorts’ improved margins, return-ratios and cash flows were under-appreciated by the market. Non-agri businesses and collaboration with Kubota can add to long-term growth prospects.

IIFL Securities says that Escorts has outperformed the industry over FY16-21, with market-share gains in South and West India, where Escorts was traditionally weak. Overall, it is expected that Escorts’ tractor volumes will grow 14% in FY22, vs. 10% for the industry. If Escorts finds traction in the non-agri segments (construction equipment and railways), it would add to the overall growth.

IIFL Securities says that over the years (even pre-FY21), Escorts has seen sharp improvement in margins, return ratios and cash flows. RoCE (ex-cash) has improved, from single-digits over FY11-16 to 50% in FY21. Average free cash flow conversion in the past five years has been 75%, resulting in the balance-sheet moving from being net-debt to net-cash.

IIFL Securities says that there is a strong possibility of rise in dividend pay-out, given that the business has transformed into a cash-generating one. Notwithstanding tractor cycles, Escorts has the potential to trade at higher valuations, it added.