Escorts Kubota - Transforming For Enduring Growth: ICICI Direct

ICICI Direct Report

We recently attended Escorts Kubota Ltd.’s analyst meet in Faridabad wherein the company revealed its mid-term business plan. Key highlights, FY28 targets:

• aspiration to grow revenues to more than 2.5 times of FY22 levels (i.e. ~Rs 22,500 plus crore in FY28E, implied compound annual growth rate of 16.5%+);

• increase share of exports from ~6.4% in FY22 to ~15-20% in FY28E;

• target Ebitda margins to mid-teens;

• return on capital employed at 25-30% and return on equity more than 18%.

• within segments, agri segment is expected to grow by 2.5 times; construction equipment is expected to grow by two times; whereas railway division is expected to grow by three times by FY28E riding on new products under development.

• Escorts Kubota also shared firm capital allocation strategy wherein Escorts Kubota will invest up-to 5% of net profit for research and development, innovation for new technologies; cash return to shareholders in the form of dividend plus buyback at up-to 40% of net profit.

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