Escorts Ltd Stock Analysis| Why Stock Price going up?

Escorts Q2FY21 Performance Overview

Introduction

In the last 1 year, Escorts stock has delivered phenomenal returns to the tune of ~112% and metamorphosed into a mid cap company. Also, as a consequence of the favorable conditions at present for the Tractor industry, this company is being re-rated. Let us further explore and analyze the Q2 FY21 results posted by the company.

Escorts Q2FY21 Results Analysis

Escorts Ltd Stock Rally

• The company’s share price has soared like an eagle from Rs. 662 in November 2019 to Rs. 1420 in November 2020.
• It has a 52-week low of Rs. 526.05 and recently hit a 52 week high of Rs. 1422.3.

Escorts ltd stock Q2 FY21 Results (Standalone)

• The company’s domestic tractor market share has contracted by 1.4% and 0.9% YoY and QoQ basis respectively.
• Don’t let the above figures deceive you into believing that the company has underperformed. The overall tractor market has witnessed an expansion in the previous quarter and simultaneously Escorts Ltd has been operating at optimum capacity utilization,
• Thus, this is a positive development as it gives a company a new opportunity for revenue and profit growth in the coming quarters.
• The company has recorded robust revenue growth of 24% YoY basis as well as 54.5% QoQ basis exhibiting recovery trends.
• Escorts Ltd. seems to be functioning above its breakeven point as the benefit of operating leverage is visible with material costs shrinking by 4% both YoY and QoQ.
• Along similar lines, Manpower costs have decreased by 1.5% YoY and 4.3% QoQ.
• EBITDA and EBITDA margins have expanded commensurately by whooping 137% and 8.7% YoY as a ripple effect of enhanced operating leverage.
• Despite the increase in the tax rate, the company has managed to record a 2.2 times jump in Net Profit YoY with PAT Margins also up by 6.2% on a YoY basis.

Conclusion

Tractor sales have grown robustly because of the ongoing recovery in farm equipment demand. As a result of positive macroeconomic factors, the agriculture sector is expected to continue its upward trajectory.

Escorts Ltd. has a huge growth potential even after an 112% rally in the stock price. Consequently, investors continue to be interested in the company.