Escorts Ltd – one of India’s largest construction equipment and tractor manufacturer – reported a 7.8% increase in net profit to 121.4 crore for the quarter ending March 31, due to subdued growth in tractor segment.

Tractor sales during the quarter increased by 6.7% to 25136 units while the same from the construction equipment segment decreased by 5.6% to 1455 units.

Consequently, the total revenue from operations increased by 13.6% to 1631.7 crore and the same from the railway business increased significantly by 36% to 103.5 crore though on small base.

The operating profit or earnings before interest tax depreciation and amortization increased by 9.2% to 189.8 crore while the operating margin stood at 11.6% for the quarter.

According to Nikhil Nanda, chairman, Escorts Ltd, the company is committed to provide state of the art technology & unique engineering solutions for mechanized and innovative agriculture solutions, well supported infrastructure & safe rail transport.

“We will continue to bring in new technologies with a blend of frugal engineering and global technology collaborations for domestic and global markets, enabled by strong product mix and expanded distribution network. Our emerging businesses like crop solutions rental services, aggregation of tractors for wider usage will provide strong impetus and farmer access to modern agriculture practices," added Nanda.

“With the uncertainty around tractor demand and the cyclicality in the construction equipment business, current valuations capture most of the expected positives, in our view," said Deep Shah and Jinesh Gandhi, research analysts, Motilal Oswal in a report on May 8.

For year ended March 31, 2019, the total revenue of the Delhi based company increased by 23.5% to 6196.4 crore, while the net profit jumped by a whopping 40% to 484.9 crore on the back of robust growth in tractor sales in the first half of the year.

“We cut our FY20 and FY 21 earnings per share (EPS) by 4% and 5%, respectively, to factor in the reduction in our volume estimate by 1% for both years given uncertain tractor demand. We also cut our EBITDA margin estimate by 40 basis points to factor in higher expense and operating deleveraging, leading to an earning CAGR of just 6.5% over FY19-21," said analysts of Motilal Oswal in a report.

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