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Escorts net up 33%

Jun 17, 2000

Escorts Ltd, reported a net profit of Rs 1,124 m for FY2000, which is a growth of 33.5% YoY as compared to Rs 842 m reported in FY99. The FY2000 net includes a non-recurring income of Rs 730 m and an operational other income of Rs 225 m. Hence the company's net margins have improved from 7.6% in FY99 to 8.7% in FY2000. The operating margins however have declined to 17.8% in FY2000.Escorts Ltd manufactures tractors (84.5% of sales in FY99). The company’s existing products are the Escorts 24 HP-40 HP model, Farmtrac 45 HP-75 HP model and Powertrac (30-42 HP) model. Besides the company also has a presence in auto ancillaries, shock absorbers and railway ancillary products. The company reported sales of Rs 12.9 bn for FY2000.

(Rs m)FY1999FY2000Change
Sales 11,056 12,958 17.2%
Operating Profit (EBDIT) 1,996 2,303 15.4%
Operating Profit Margin (%)18.0%17.8% 
Interest 581 525 -9.6%
Profit before Tax 1,102 1,424 29.2%
Tax 260 300 15.4%
Profit after Tax/(Loss) 842 1,124 33.5%
Net profit margin (%)7.6%8.7% 
Earnings per share*11.715.6 

Due to drought conditions prevailing in Gujarat and Rajasthan, FY2001 has not started on a very good note, leading to a slack in demand for tractors. On the positive side however the expected normal monsoons could result in a pick in demand during the rest of the year.

Though Escorts continues to enjoy a strong position in the tractor market, however areas of concern have been its diversification into telecom, health, agri-business and infotech. As they are fairly new entrants to these sectors they will face competition in these areas from existing players. On the tractor industry front the concern has been the entry of global players like John Deere and New Holland, leading to higher competition.

Escorts on the current price of Rs 130 is trading at a price to earnings multiple of 8.3x FY2000 earnings.

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