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ESCORTS
Key takeaways
Escorts indicated that they expect tractor industry volumes to increase by 11-12% yoy in
FY2012. Escorts tractor volumes declined by 21% yoy in 1QFY12. The company’s market
share has declined to 11.2% from 13% in FY2010.
The company highlighted that the past few years have seen double-digit tractor volumes
growth which is primarily led by non-agricultural usage (pipeline, buildings, flyover, earth
moving jobs). Unlike agricultural usage where the farmer uses a tractor for about 5
months per annum, tractors get used throughout the year in such infrastructure jobs
leading to shorter life (3-4 years) and replacement cycle.
The company has a capacity of 75,000 units of tractors and is currently producing 60,000
units from its plant.
The company has taken two sets of price increases of 0.5% on February 1 and 3.5% on
March 1, 2011. EBIT margins declined by 1.4% qoq in 1QFY12 due to significant rise in
raw material costs.
Auto suspension division continues to make losses and the company’s expectations of
achieving a breakeven in FY2012E could be under threat.
Railways division sales are also under pressure due to lower offtake by Railways. The
company plans to boost export revenues and also launch two new products – balance
draft gear and bogie mounted braking systems to boost revenues. Operating margins
have also declined by 5% sequentially due to lower sales and higher fixed costs.
Construction equipment business revenues have been growing at a robust pace driven by
strong demand of pick and carry cranes and backhoe loader revenues. Pick and carry
cranes form 63% of construction equipment revenues while backhoe loaders now form
14% of construction equipment revenues.
Operating margins in the construction equipment business is also under pressure. The
company plans to spend Rs405 mn over the next two years increasing paint shop capacity,
fabrication and assembly capacity of backhoe loaders, pick and carry cranes and creating
in-house manufacture of F 15s, TRX and slew cranes.
Total net debt is about Rs1.8 bn and working capital of Rs1.8-1.9 bn. The company plans
to spend Rs1.45 bn of capex of which Rs600 mn has already been spent on
modernization of the plant.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ESCORTS
Key takeaways
Escorts indicated that they expect tractor industry volumes to increase by 11-12% yoy in
FY2012. Escorts tractor volumes declined by 21% yoy in 1QFY12. The company’s market
share has declined to 11.2% from 13% in FY2010.
The company highlighted that the past few years have seen double-digit tractor volumes
growth which is primarily led by non-agricultural usage (pipeline, buildings, flyover, earth
moving jobs). Unlike agricultural usage where the farmer uses a tractor for about 5
months per annum, tractors get used throughout the year in such infrastructure jobs
leading to shorter life (3-4 years) and replacement cycle.
The company has a capacity of 75,000 units of tractors and is currently producing 60,000
units from its plant.
The company has taken two sets of price increases of 0.5% on February 1 and 3.5% on
March 1, 2011. EBIT margins declined by 1.4% qoq in 1QFY12 due to significant rise in
raw material costs.
Auto suspension division continues to make losses and the company’s expectations of
achieving a breakeven in FY2012E could be under threat.
Railways division sales are also under pressure due to lower offtake by Railways. The
company plans to boost export revenues and also launch two new products – balance
draft gear and bogie mounted braking systems to boost revenues. Operating margins
have also declined by 5% sequentially due to lower sales and higher fixed costs.
Construction equipment business revenues have been growing at a robust pace driven by
strong demand of pick and carry cranes and backhoe loader revenues. Pick and carry
cranes form 63% of construction equipment revenues while backhoe loaders now form
14% of construction equipment revenues.
Operating margins in the construction equipment business is also under pressure. The
company plans to spend Rs405 mn over the next two years increasing paint shop capacity,
fabrication and assembly capacity of backhoe loaders, pick and carry cranes and creating
in-house manufacture of F 15s, TRX and slew cranes.
Total net debt is about Rs1.8 bn and working capital of Rs1.8-1.9 bn. The company plans
to spend Rs1.45 bn of capex of which Rs600 mn has already been spent on
modernization of the plant.
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