ESCORT LIMITED
 
  

 
 

SHARETIPSINFO >>Research Reports >>ESCORT LIMITED(17-08-2009)

 

LISTING
CMP

Rs70

52 WEEK HIGH/LOW

Rs88/Rs30

Face Value
Rs10
Average Volume

1588767

PE Ratio
18.6X
P/BV

1

Market Cap

Rs618 crore

 

COMPANY OVERVIEW:
After partition the registered office of the company was shifted from Lahore to New Delhi. The name of the company was changed from Escorts (Agents) Pvt Ltd to Escorts Ltd upon its conversion to public limited company.
Escorts operate in the Agri-machinery, construction & material handling equipments, railway equipment and auto components.


Marketing and Distribution network:
Escorts have over 1600 sales points and service outlets and footprint in over 40 countries.


PRODUCT MIX:


PRODUCT

SALES(In crore)

% of Total

Agriculture Tractor Self Propelled Harvester. Inclusive Rice Transplanter

Rs1623.62 crore

79.66%

Others

Rs97.16 crore

4.76%

Automobile shocks absorbers, Telescopic Front Fork & Mcpherson strut.

Rs88.54 crore

4.34%

Implements, trailers, compressor accessories, spares and others.

Rs84.37 crore

4.13%

All types of brakes used by the railways.

Rs44.92 crore

2.2%

Engines for agriculture Tractors.

Rs26.05 crore

1.27%

Brake block.

Rs20.66 crore

1.01%

Other services.

Rs14.62 crore

0.71%

Round & flat Tubes Heating Elements.

Rs10.71 crore

0.52%

Lubricant Oil

Rs8.8 crore

0.43%

Double acting Hydraulic shocks absorbers for railway coaches.

Rs8.37 crore

0.41%

Center buffer couplers.

Rs5.12 crore

0.25%

Scrap

Rs3.49 crore

0.17%

Other fiscal benefits.

Rs1.58 crore

0.07%

 

 

 

KEY RATIONAL FOR INVESTMENTS:
Q1FY2010 earning has shown robust jump of 139.3% as compared to last year same period.
Q1FY2010 PBDITA margin has improved by 250 basis points from 7.18% to 9.9%. This shows improvement in operational efficiency.
The company is the key player in agricultural equipment. As there is push by the government for the betterment of agri sector, the company is expected to benefit in medium term.
Rising commodity price will bring more investment into the agricultural sector and hence will benefit the company.
In 11th five year plan there is huge outlay on the infrastructure sector. Escort is also major player in heavy equipment needed for different activities in infrastructure. So company will also benefit from the higher infrastructure budget.
Escorts supplies different engineering equipment to railway, the expansion of railway network will help increase the top line of the company.
Escorts ltd is also rightly placed in the outsourcing domain. As the international player looks for cost cutting they can transfer some part of work to low cost destination. The company can benefit by working for renowned international player as it has years of expertise in the field of engineering equipments making.

SHAREHOLDING PATTERN:

 

 

NO. OF SHARES

% OF TOTAL

PROMOTERS

29059650

 

32.04%

 

INSTITUTION

29168793

 

32.16%

 

GENERAL PUBLIC

32481053

 

35.80%

 

GRAND TOTAL

90709496

 

100.00%

 

FINANCIAL:

 

 

30/09/05

30/09/06

30/09/07

30/09/08

TOTAL INCOME

1813.66

1876.02

2102.15

2051.55

YoY% Change

 

3.44%

12.05%

-2.40%

EXPENDITURE

-1578.9

-1673.79

-2000.2

-1899.08

PBDITA

 

234.76

202.23

101.95

152.47

YoY% Change

 

-13.85%

-49.60%

49.60%

DEPRECIATION

-61.95

-47.05

-44.97

-51

PBIT

 

172.81

155.18

56.98

101.47

INTEREST

 

-141.79

-84.95

-68.95

-55.93

PBT

 

31.02

70.23

-11.97

45.54

TAX

 

8.09

-15.44

10.89

-14.27

EXTRA ORD INCOME

0

-35.79

-5.36

-19.4

PAT

 

39.11

19

-6.44

11.87

YoY% Change

 

-51.40%

-133.90%

284.31%

KEY HIGHLIGHTS:
Company has show marginal negative growth last year in sales. Its YoY sales decreased by 2.5% 
Company PBDITA margin improved and its PBDITA has shown growth of   49.6%.
PAT too has shown improvement of 284.31%. Such whopping increase in PAT is due to the company coming out of red in the last fiscal.

RATIOS:

 

 

30/09/05

30/09/06

30/09/07

30/09/08

EPS

 

4.312018

2.094818

-0.71003

1.30871

PBDITA MARGIN

12.94399

10.77974

4.849797

7.431942

NPM

 

2.156413

1.012782

-0.30635

0.578587

INTEREST COVER

1.218688

1.826722

0.825797

1.811964

KEY HIGHLIGHTS:
EPS has grown 248% as compared to last year negative EPS.
PBDITA margin improved from just 4.84% to 7.4%.
NPM was negative in FY2007 at -.3 but has move up in FY2008 to 0.57.
Interest cover also moved up from below 0.82 to 1.81 in FY2008.

 

COMPARISION OF Q1FY2010 WITH Q1FY2009:

 

 

Q1FY2009

%CHANGE

Q1FY2010

TOTAL INCOME

542.83

7.50%

 

583.44

EXPENDITURE

-503.83

 

 

-520.16

PBDITA

 

39

37.90%

 

63.28

DEPRECIATION

-10.03

 

 

-11.91

PBIT

 

28.97

 

 

51.37

INTEREST

 

-14.63

 

 

-9.92

PBT

 

14.34

 

 

41.45

TAX

 

-5.03

 

 

-19.18

PAT

 

9.31

139.30%

 

22.27

KEY HIGHLIGHTS:
Total Income moved up by 7.5% in Q1FY2010 as compared to last year same period.
PBDITA jumped by 37.9% due increase in operational efficiency. Decline in the raw material cost is the major reason for the surge.
PAT surged by 139.3%.Decline interest outgo and good jump in PBDITA is the reason for surge in PAT.

VALUATION&OUTLOOK:
At CMP of Rs70 the stock is trading at 18.3X to trailing 12 months earning. We expect the FY2010E EPS to be Rs5.5. So the stock is available at 13X to FY2010E earning. We value the counter at 20X as the sector is expected to see robust growth in the coming years. The fair value of the stock we arrive at is Rs110.
The industry and company outlook is very good and it is expected grow robustly for next 3-4 years.

CONCLUSION:
The investors with six to eight months investment time frame should take exposure on the counter. The downside risk in the stock is very limited.

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