Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ESCORTS LTD
PRICE: RS.88 RECOMMENDATION: BUY
TARGET PRICE: RS.157 FY12E P/E: 6.3X
q Escorts standalone 3QFY11 results were broadly in line with our estimates
but lower than street expectations. Revenues for the quarter
dropped by 9.6% primarily on back of decline in tractor sales.
q Lower tractor sales led to decline in EBITDA margin for the company.
q Net profit for the quarter stood at Rs132mn as against our expectations
of Rs.140mn.
q 3QFY11 was a weak quarter for the company in terms of tractor sales.
We expect 4QFY11 also to remain weak and expect improvement from
1QFY12 onwards.
q We lower our FY12 estimates to factor in company's weak performance
primarily on the margin front. However, we expect margins to grow on
low FY11 base.
q We lower our DCF based price target on the stock to Rs157 (Rs204 earlier).
In view of sharp correction in the stock price, we retain our BUY
rating.
Revenues suffer on account of poor tractor sales
n Revenues during the quarter stood at Rs.7,290mn as against Rs.8,062mn reported
during 3QFY10 and as against our estimate of Rs7,205mn.
n Sales from the tractor business de-grew by 10.6% YoY to Rs6,686mn on account
poor tractor sales during the period under consideration. Tractor sales in 3QFY11
declined by 21% YoY to 14,212 units. Company claims that tractor sales remained
weak in the northern and the central region which are the stronghold for
Escorts.
n Tractor sales being seasonal in nature, we do not expect the sales to improve
QoQ for the company. However, we remain positive for tractor demand on account
of two prime reasons 1.Rising farm income 2.Labor shortage. We therefore
expect tractor demand to remain robust going ahead.
n In the railway equipment division, revenues grew by 5.5% YoY from Rs415mn in
3QFY10 to Rs437mn in 3QFY11. Sequentially revenues were down by 14.4%. As
per the management, the order off-take in this segment is gaining momentum.
n Auto ancillary revenues grew by 8.6% YoY to Rs306mn. However on QoQ basis
revenues dropped by 19%. Company has started getting orders from new customers
including OEM's.
n On the construction equipment business the company has reported 39% jump in
FY11 YTD revenues.
Margins remains depressed; expect situation to improve in FY12
n EBITDA during the quarter stood at Rs237mn (our estimate of Rs205mn) as
against Rs737mn reported during similar quarter last year.
n EBITDA margins for the quarter stood at 3.2% (estimate of 2.8%) as against
9.1% in 3QFY10. Margins for the company have been under pressure since
4QFY10 and the same continued into the quarter under review.
n We expect the margins in 4QFY11 to remain subdued.
n We expect margins to improve in FY12 on account of 1.Full impact of various
cost cutting initiatives taken by the company 2.Expected improvement in tractor
sales 3.Break-even in the auto ancillary business 4.Management indication of improving
order off-take in the railway equipment division and 5.Expected healthy
performance from the construction equipment business.
n We therefore expect the company's consolidated EBITDA margin to improve
from FY11E margin of 4.1% to 5% in FY12.
Standalone PAT down significantly
n Company's PAT were down by 71% YoY and 82% QoQ to Rs132mn.
n Interest cost for the quarter stood at Rs76mn versus interest income of Rs3mn in
3QFY10.
n Other operating income increased significantly YoY but was broadly in line with
2QFY11.
Outlook and valuations
n On the standalone basis, the company's FY11 YTD performance has been below
expectations. Revenues had been impacted on account of poor tractor sales in
3QFY11 and decrease in order from the railways. FY11 YTD margins have been
poor due to input cost pressure and poor performance from key businesses.
n We expect another quarter of subdued performance for the company and expect
improvement in FY12.
n However going back to earlier high level margins seems to be a difficult task and
we therefore lower our long term margin projection growth for the company in
our DCF assumptions.
n We have lowered our FY12 PAT estimates by 20% primarily on back of reduction
of margin estimates from 6.1% earlier to 5%.
n We have lowered our DCF based price target to Rs157 (earlier Rs204). In view of
sharp correction in the stock price, we retain our BUY rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ESCORTS LTD
PRICE: RS.88 RECOMMENDATION: BUY
TARGET PRICE: RS.157 FY12E P/E: 6.3X
q Escorts standalone 3QFY11 results were broadly in line with our estimates
but lower than street expectations. Revenues for the quarter
dropped by 9.6% primarily on back of decline in tractor sales.
q Lower tractor sales led to decline in EBITDA margin for the company.
q Net profit for the quarter stood at Rs132mn as against our expectations
of Rs.140mn.
q 3QFY11 was a weak quarter for the company in terms of tractor sales.
We expect 4QFY11 also to remain weak and expect improvement from
1QFY12 onwards.
q We lower our FY12 estimates to factor in company's weak performance
primarily on the margin front. However, we expect margins to grow on
low FY11 base.
q We lower our DCF based price target on the stock to Rs157 (Rs204 earlier).
In view of sharp correction in the stock price, we retain our BUY
rating.
Revenues suffer on account of poor tractor sales
n Revenues during the quarter stood at Rs.7,290mn as against Rs.8,062mn reported
during 3QFY10 and as against our estimate of Rs7,205mn.
n Sales from the tractor business de-grew by 10.6% YoY to Rs6,686mn on account
poor tractor sales during the period under consideration. Tractor sales in 3QFY11
declined by 21% YoY to 14,212 units. Company claims that tractor sales remained
weak in the northern and the central region which are the stronghold for
Escorts.
n Tractor sales being seasonal in nature, we do not expect the sales to improve
QoQ for the company. However, we remain positive for tractor demand on account
of two prime reasons 1.Rising farm income 2.Labor shortage. We therefore
expect tractor demand to remain robust going ahead.
n In the railway equipment division, revenues grew by 5.5% YoY from Rs415mn in
3QFY10 to Rs437mn in 3QFY11. Sequentially revenues were down by 14.4%. As
per the management, the order off-take in this segment is gaining momentum.
n Auto ancillary revenues grew by 8.6% YoY to Rs306mn. However on QoQ basis
revenues dropped by 19%. Company has started getting orders from new customers
including OEM's.
n On the construction equipment business the company has reported 39% jump in
FY11 YTD revenues.
Margins remains depressed; expect situation to improve in FY12
n EBITDA during the quarter stood at Rs237mn (our estimate of Rs205mn) as
against Rs737mn reported during similar quarter last year.
n EBITDA margins for the quarter stood at 3.2% (estimate of 2.8%) as against
9.1% in 3QFY10. Margins for the company have been under pressure since
4QFY10 and the same continued into the quarter under review.
n We expect the margins in 4QFY11 to remain subdued.
n We expect margins to improve in FY12 on account of 1.Full impact of various
cost cutting initiatives taken by the company 2.Expected improvement in tractor
sales 3.Break-even in the auto ancillary business 4.Management indication of improving
order off-take in the railway equipment division and 5.Expected healthy
performance from the construction equipment business.
n We therefore expect the company's consolidated EBITDA margin to improve
from FY11E margin of 4.1% to 5% in FY12.
Standalone PAT down significantly
n Company's PAT were down by 71% YoY and 82% QoQ to Rs132mn.
n Interest cost for the quarter stood at Rs76mn versus interest income of Rs3mn in
3QFY10.
n Other operating income increased significantly YoY but was broadly in line with
2QFY11.
Outlook and valuations
n On the standalone basis, the company's FY11 YTD performance has been below
expectations. Revenues had been impacted on account of poor tractor sales in
3QFY11 and decrease in order from the railways. FY11 YTD margins have been
poor due to input cost pressure and poor performance from key businesses.
n We expect another quarter of subdued performance for the company and expect
improvement in FY12.
n However going back to earlier high level margins seems to be a difficult task and
we therefore lower our long term margin projection growth for the company in
our DCF assumptions.
n We have lowered our FY12 PAT estimates by 20% primarily on back of reduction
of margin estimates from 6.1% earlier to 5%.
n We have lowered our DCF based price target to Rs157 (earlier Rs204). In view of
sharp correction in the stock price, we retain our BUY rating.
No comments:
Post a Comment