Two men ride a tractor along a dirt road in Bhamana village, Maharashtra, India. (Photographer: Dhiraj Singh/Bloomberg)

Escorts Aims To Outpace Industry Growth In The First Quarter Of FY20

Escorts Ltd. is eyeing to outpace the industry growth in the three months to June, its Group Chief Financial Officer Bharat Madan said.

The tractor maker expects about 10-15 percent growth in the industry during April-June period, and the company, he said, will beat that during the period based on the probability by considering its past performance

Escorts expects about 3-5 percent industry growth during the last quarter of FY19 due to high base. “The growth is expected to taper as the industry grew 49 percent in the year-ago period,” Madan told BloombergQuint, adding that he expects the growth to rebound in the first quarter of the current financial year.

“We are, however, uncertain about the second and third quarter of the next financial year as it will depend on the election outcome and the monsoon,” Madan said.

Q3 Profit Tops Estimates

The farm equipment maker’s quarterly profits beat analyst estimates as its tractor sales witnessed a jump.

Net profit rose 52.3 percent year-on-year to Rs 140.1 crore during the December quarter, according to the tractor maker’s stock exchange filing. That compares with Rs 126 crore that analysts surveyed by Bloomberg had forecast. The company’s other income jumped three times to Rs 24.4 crore. It had an exceptional gain of Rs 10.9 crore.

Revenue jumped 37.4 percent on a yearly basis to Rs 1,655.1 crore, ahead of the Rs 1,593 crore forecast. Revenue from its railway division rose 34 percent to Rs 96.6 crore.

“We are continuously investing in new technologies, product mix and expanded distribution network for significant domestic growth and global reach,” Chairman and Managing Director Nikhil Nanda said in an earnings presentation.

The agri-machinery maker sold 25,743 tractors between October and December, an increase of 36 percent from the corresponding quarter last year. The sale of construction equipment rose 30 percent to 1,413 units.

The company’s order book in the railway segment stood at more than Rs 450 crore as of Dec. 31, which will get executed in next 13-15 months, Madan said in an analyst conference call on Monday.

Going forward, in current year, we will be executing orders for new products with more import content, which may lead to some adverse impact on margin in the short-term, though, in the medium to long-term, we’ll be able to mitigate the impact with gradual localisation of these components.
Bharat Madan, Group Chief Financial Officer, Escorts Ltd.

Margin To Improve By 100 Basis Points

Operating income or the earnings before interest, tax, depreciation and amortisation rose 38.4 percent on a yearly basis to Rs 200.5 crore during the three months ended December—the consensus estimate was Rs 195 crore. Its operating margin expanded slightly to 12.1 percent during the period—analysts had forecast 12.2 percent.

“The margin was impacted during the period due to the inflation and product mix in the tractor segment,” Madan said.

We expect our margin to improve by 100 basis point during the current financial year, Madan said, adding that the margin will improve in the March quarter due to the softening of commodity prices.

Shares of the company fell as much as 6.6 percent, the most since Oct. 08, to Rs 630.25 apiece. That compared with 0.25 percent decline in the country’s benchmark NSE Nifty 50 Index.

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