Escorts Kubota Falls The Most In Four Months On Q1 Miss

Shares of Escorts Kubota Ltd. fell the most in four months at closing of trade on Tuesday as the tractor maker's first-quarter earnings missed estimates.

Analysts said recent price hikes and uptick in steel prices hurt the demand sentiment and expect the uncertainty in tractor cycle to result in muted earnings growth over the next few quarters.

Escorts Kubota Q1 FY23 (Consolidated, QoQ)

• Revenue up 8% at Rs 2,032.1 crore (Estimate: Rs 2,080 crore)

• Ebitda down 18% at Rs 203.6 crore

• Ebitda margin at 10% versus 13%

• Net profit down 26% at Rs 140.6 crore (Estimate: Rs 225 crore)

The shares of the company fell nearly 7% intraday, but closed 5.2% lower. Of the 26 analysts tracking the company, nine maintain 'buy', 10 suggest 'hold' and seven recommend 'sell'. The overall consensus price of analysts tracked by Bloomberg implies an upside of 6.0%.

Since the earnings, Kotak Institutional Equities, Spark Capital, JPMorgan, Dolat Capital have downgraded the the stock.

YES Securities

• Maintains 'reduce' with the target price raised to Rs 1,382 from Rs 1,372, an implied downside of 20%.

• Company witnessed dual impact of market share loss by 210 basis points and margin contraction.

• Demand sentiment has been hurt by product price hikes.

• Escorts is more vulnerable than peers, with valuations not reflecting consistent market share loss and weakening margins.

• Cuts FY23 EPS by 16% to factor in weaker sales mix and aggressive pricing

Motilal Oswal

• Maintains 'neutral' and keeps target price unchanged at Rs 1,575, an implied downside of 3.1%.

• Weaker mix and sharp uptick in steel prices hurt Q1 performance.

• Visibility on margin recovery remains high, while market share revival needs to be monitored carefully.

• Cuts FY23/24E EPS by 7%/6% respectively to factor in a deteriorating mix and lower volumes.

• Expects uncertainty in tractor cycle to result in muted earnings growth over the next few quarters.

Emkay

• Reiterates 'buy' and keeps target price unchanged at Rs 2,140, an implied upside of 24.2%.

• High commodity inflation, adverse tractor mix led to Ebitda decline.

• Reduces FY23-24E Ebitda by 3-8%, factoring lower tractor volume and margin assumptions.

• Expects 13% revenue CAGR over FY22-24E.

• Medium-term prospects look encouraging due to support from Kubota in localisation of tractor imports, among others.