Escorts: On a exit mode - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Escorts: On a exit mode

Dec 4, 2002

While it has been eventful year for most of the auto companies, it is not the case with tractor manufacturers. They have been affected by poor offtake. However, Escorts' performance has been weaker compared to its peers. The slowdown in demand combined with significant pricing pressure has resulted in the company posting a bigger loss in 2QFY03 compared to the corresponding period previous year.

(Rs m) 2QFY02 2QFY03 Change 1HFY02 1HFY03 Change
Net sales 1,653 1,627 -1.6% 4,153 3,300 -20.5%
Other Income 35 7 -81.3% 559 22 -96.2%
Expenditure 1,785 1,856 4.0% 4,091 3,676 -10.1%
Operating Profit (EBDIT) (133) (229) 72.8% 62 (376) -
Operating Profit Margin (%) -8.0% -14.1% 1.5% -11.4%
Interest 152 140 -7.6% 305 325 6.6%
Depreciation 95 97 2.1% 201 202 0.3%
Profit before Tax (345) (460) - 115 (881) -
Extraordinary items - 41 - (33) 6 -
Tax (75) (15) - 20 (175) -
Profit after Tax/(Loss) (270) (403) 49.6% 63 (700) -
Net profit margin (%) -16.3% -24.8% 1.5% -21.2%

The sector has been negatively impacted by volatile agricultural sector performance in the last three years, poor monsoon in select states and significant rise in capacity with the entry of multinationals continues to have a large impact on the indian tractor sector. However, there are factors internal to Escorts that are responsible for its poor performance which is indicated by the fact that tractor volumes for the first half of the current fiscal are lower by almost 44% to 8,031 units. Escorts' tractor sales have been erratic ever since a labour strike that the company had to deal with in August-November 2001. After losing significant market share during this period, the company went on an production spree that resulted in tractor sales increasing at a stellar rate of 46% in 4QFY02 (i.e. January-March 2002). But this proved to be a temporary measure. Escorts has once again reverted back to a destocking exercise, which is reflected in its 1HFY03 financials. This means lower production.

Lower capacity utilisation has negated benefits arising from reduction in employee costs to a large extent in 1HFY03. Operating margins, as a result, has also plummeted sharply in 1HFY03. As per our estimates, tractor industry sales have fallen by 10% in 1HFY03 to 81,336 units (excluding foreign players like John Deere). We expect demand scenario to worsen in 2HFY03 in light of poor monsoon (14 states are facing a drought) in the current fiscal year thus resulting in a 20% fall in volume sales for FY03. Escorts is also likely to post similar performance, as far as the tractor division is concerned.

The company has entered into an agreement to divest its entire 40% stake in Escorts JCB Ltd, which is expected to fetch Rs 2,140 m for Escorts. Pending certain regulatory clearances, this income is not accounted for in 2QFY03 numbers. Apart from this, the company has also divested its entire 60% stake in Escorts Class that has resulted in a profit of Rs 582 m, which is included in the extraordinary income in 2QFY03. The company has utilised the surplus proceeds to retire some high cost debts that is evident from lower interest outflow in 2QFY03.

The stock currently trades at Rs 48 implying a P/E multiple of 9.5x FY04E earnings. The company is scouting for a equity partner for its cellular telephony venture, Escotel, which is a positive for the parent company. As of June 2002, Escotel's total number of subscribers stood at 571,887 that translates into a market share of 8%. This combined with exit from identified non-core businesses are the key triggers for the stock price (We expect the company to divest its stake in Escorts Mahle in the near future).

Equitymaster requests your view! Post a comment on "Escorts: On a exit mode". Click here!

  

More Views on News

ESCORTS LIMITED 2020-21 Annual Report Analysis (Annual Result Update)

Aug 12, 2021 | Updated on Aug 12, 2021

Here's an analysis of the annual report of ESCORTS LIMITED for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of ESCORTS LIMITED. Also includes updates on the valuation of ESCORTS LIMITED.

ESCORTS LIMITED Announces Quarterly Results (1QFY22); Net Profit Up 100.8% (Quarterly Result Update)

Aug 9, 2021 | Updated on Aug 9, 2021

For the quarter ended June 2021, ESCORTS LIMITED has posted a net profit of Rs 2 bn (up 100.8% YoY). Sales on the other hand came in at Rs 17 bn (up 56.2% YoY). Read on for a complete analysis of ESCORTS LIMITED's quarterly results.

ESCORTS LIMITED Announces Quarterly Results (3QFY21); Net Profit Up 83.4% (Quarterly Result Update)

Feb 5, 2021 | Updated on Feb 5, 2021

For the quarter ended December 2020, ESCORTS LIMITED has posted a net profit of Rs 3 bn (up 83.4% YoY). Sales on the other hand came in at Rs 20 bn (up 23.5% YoY). Read on for a complete analysis of ESCORTS LIMITED's quarterly results.

Massive Surge in the Shares of Tata Motors Today. Key Factors Favouring the Rally (Views On News)

Oct 13, 2021

Tata Motors zooms 23% after report of TPG investing Rs 75 bn in EV arm.

India's Edge in Electric Vehicle Stocks podcast (Views On News)

Sep 9, 2021

India has a huge advantage in using climate friendly EV batteries.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

ESCORTS LIMITED SHARE PRICE


Dec 7, 2021 11:58 AM

TRACK ESCORTS LIMITED

  • Track your investment in ESCORTS LIMITED with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON ESCORTS LIMITED

ESCORTS LIMITED - VST TILLERS COMPARISON

COMPARE ESCORTS LIMITED WITH

MARKET STATS