Escorts extends gain; stock zooms over 250% in FY17

Thus far in FY17, the stock has appreciated by 273% from Rs 139 as compared to 14% rise in Sensex.

Share of farm and construction equipment major Escorts continued their upward march with the stock hitting new high of Rs 518, up 4.6% on BSE on expectation of strong tractor sales.

So far in the financial year 2016-17 (FY17), the stock has appreciated by 273% from Rs 139 as compared to 14% rise in the S&P BSE Sensex, on back of strong operational performance.

The company’s EBITDA (earnings before interest, tax, depreciation and amortization) for the first nine months (April to December) of FY17was up by 87.5% at Rs 249 crore as against Rs 133 crore in the corresponding nine-month period last fiscal. EBITDA margin expanded 290 basis points at 8% against 5.1% last year.

Rajan Nanda, chairman and managing director, Escorts said while announcing December quarter results, agricultural and highways focus in the union budget will also have a positive impact on farm income, rural economy and infrastructure development fostering further investments and opportunities.

Escorts’ agri machinery segment (EAM) had reported 23.1% year on year growth in tractor sales at 56,707 units during first 11 months (April to February) of FY17. It had sold 46,052 tractors during the same period last fiscal.

CRISIL Research estimates domestic tractor sales to close fiscal 2017 with an impressive 16-18% growth, riding a monsoon-led surge in demand that was enough to offset the impact of demonetisation in the latter half.

The previous two fiscals had seen double-digit de-growth as monsoons played truant and farm sentiment wilted.

Indications are that the south-west monsoon will be normal this year as well. While there is a threat of El-Nino conditions developing in the second half of next fiscal, the Kharif season could very well escape unscathed. Tractor sales would also benefit from favorable budget announcements such as record farm credit disbursal of Rs 10 lakh crore and other rural development initiatives.

“Based on this, we see tractor volumes picking up in coming quarters, though, for lack of a low base as was the case this year, fiscal 2018 could close with a relatively sober growth of 8-10%,” CRISIL Research said in release.

Meanwhile, ace investor Rakesh Jhunjhunwala holds 9.16% stake in the company, according to the latest shareholding data available on the BSE website.

At 11:15 am; the stock was up 4% at Rs 516 as compared to 0.2% rise in Sensex. A combined 2.32 million shares changed hands on the counter on BSE and NSE so far.