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Microsec Research
21
st
May 2014
We rate Escorts (Escorts) Limited a BUY. Escorts was incorporated in the year 1944 as
Escorts Agents. It has played a pivotal role in the agricultural growth of India for over five
decades. One of the leading tractor manufacturers of the country, Escorts offers a
comprehensive range of tractors, more than 45 variants starting from 25 to 80 HP. Escort,
Farmtrac and Powertrac are the widely accepted and preferred brands of tractors from the
house of Escorts. A leading material handling and construction equipment manufacturer, the
company manufactures and markets a diverse range of equipment like cranes, loaders,
vibratory rollers and forklifts. The company today is the world's largest Pick 'n' Carry
Hydraulic Mobile Crane manufacturer.
.
Investment Highlights
Stable government-positive for the company: The focus on Agriculture and mechanization
of farm sector is on the agenda of the new government and we expect that the new
government would lead to the development of the Agriculture and construction sectors as a
whole. We expect that the higher Agri and construction activities result in the higher need
of the tractors and agri equipments in the days to come. Higher revenue and better
realizations would improve the margins of the company and boost the financials. The stable
governments focus on Agriculture and construction sectors may also benefit of the
company.

Strong Revenue growth in December, 2013 Quater: The Company has shown robust growth
in Revenue during the quarter ended December, 2013. Revenue of the company has grown
by 12.78% to INR1160 crore in comparison to INR1028 crore. EBITDA of the company
improved from INR53 crore to INR71 and PAT improved from INR28 to INR60 on back the
higher tractors sales.
Expansion plans: Escorts is doubling the capacity of its Rudrapur plant. Escorts are
expanding our Rudarpur plant and would double its production capacity. Escorts
manufacture shock absorbers and struts at Rudarpur at Udham Singh Nagar in Uttrakhand.
The installed capacity is to manufacture 1.5 lakhs shock absorbers per month and it would be
expanded up to 5,00,000 numbers per month. The Company is also scouting for new markets
globally. The company started exporting tractors to Australia. The company exports its
tractors to European markets and Latin America.











Escorts Ltd
BUY
Sector- Automobiles-Tractors
SarojSingh
EmailIDssingh2@microsec.in
Current Market Price (INR) 130
Target Price 193
Upside Potential 48%
52 Week High/Low (INR) 145/60
Market Capitalization (In INR Cr.) 1,652
Market Data
81.54
91.54
101.54
111.54
121.54
131.54
141.54
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CLOSE(Escorts Ltd) CLOSE(SENSEX)
BSE Code 500495
NSE Code ESCORTS
Bloomberg Ticker ESCO IN
Reuters Ticker ESC.BO
Face Value (INR) 10.00
Equity Share Capital (In INR Cr.) 119.27
Beta vs Sensex 1.28
STOCK SCAN
Promoter
and
Promoter
Group
41.97%
FII
6.88%
DII
2.18%
Others
48.97%
Shareholding
Notes- *Financial year ended Sep, consolidate and EPS is base on no of equity share 11.93


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Microsec Research
21
st
May 2014
Escorts Ltd sales volume trend








Escorts segmental revenue
Escorts Ltd is organized in mainly four primary business segments, Agri Machinery
Products, Auto Ancillary Product, Construction Equipments and Railway equipments
businesses, all are focus areas of the new Government The companys most of the
revenue comes from Agri Machinery Products ~81%, Auto Ancillary Products
contribute 3% in revenue, Construction Equipments businesses revenue ~16% and
Railway equipments businesses 4% in 15M DEC2013.




Source-Ace equity and microsec research

Financial Performance











Source-Ace equity and microsec research
DESCRIPTION FY09A FY10A FY11A FY12A 15M Dec13 FY14E FY15 E
AgriMachineryProducts 72% 74% 71% 72% 81% 80% 82%
AutoAncillaryProducts 3% 3% 3% 3% 3% 4% 3%
ConstructionEquipments 16% 17% 19% 18% 12% 11% 11%
RailwayEquipments 7% 6% 4% 4% 4% 4% 4%
2
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7
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500
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
FY09A FY10A FY11A FY12A FY13 FY14E FY15E
NetSales EBITDA PAT
4
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6
2
7
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100000
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FY09A FY10A FY11A FY12A 15M
Dec13
FY14E FY15E
No.Tractors sold


- 3 -
Microsec Research
21
st
May 2014
Valuation
At the CMP of INR130, the stock is trading at a P/E of 8x its FY14E EPS of INR16.28 and 6.5x
its FY15E EPS of INR19.94. The company has sound business model and ROE is expected to
pick up. We assign a P/E multiple of 9.7x to its FY15E EPS to arrive at a Target price of
INR193 for a time period of 12 months.
Key Concern
Slowdown Economic is the key risk to the company.
Lower Tractors sales may impact the companys profitability.
Insufficient monsoon


























- 4 -
Microsec Research
21
st
May 2014








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