Despite being encouraged by the company's roadmap over the medium-term, JPMorgan remains underweight on the stock with a price target of Rs 1,551.
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Leading engineering conglomerate Escorts Kubota Ltd. announced on Friday that it expects its consolidated revenue to grow more than 2.5 times by fiscal year 2027-28.
During a presentation made at the ‘Escorts Kubota Investor and Analyst Meet 2022’ on Friday, the company announced that it was aspiring for a revenue growth of more than 2.5 times over the revenue of Rs 9,068 crore it achieved in financial year 2022.
The company also said that it expected the share of export revenue to rise to 15-20 percent of the total revenue over the next five years, from nearly 6.4 percent currently. It is looking to achieve leadership in the India-led export of tractors.
In terms of profitability, the company has set a target of improving operating profit margin to the mid-teens from the present 10.8 percent.
It also aspires to be a challenging brand in the domestic tractor industry in terms of market share over the next five years. For financial year 2022, Escorts Kubota had a market share of 10.8 percent.
Target on the return on capital employed (ROCE), a term used to analyse the profitability and capital efficiency of a firm, has been set at 25-30 percent from 17 percent at present.
To achieve these objectives, the company will undertake a capacity expansion plan worth Rs 3,500 crore to Rs 4,000 crore, which will increase the total capacity from the currently 1.7 lakh to 3 lakh tractors per annum.
Additionally, the company said that it was aiming to be carbon-neutral by the year 2050. It is also keeping a target of zero landfill waste by 2026 and turning into a water-positive organisation by 2030.
Escorts Kubota’s farm machinery division, Escorts Agri Machinery (EAM), recently increased the prices of its tractors with effect from 16 November 2022.
The company said that the price hike was to offset the impact of the cost inflation in both commodity and other costs. The increase in prices varied across models and variants.
Despite being encouraged by the company's roadmap over the medium-term, JPMorgan remains underweight on the stock with a price target of Rs 1,551. The brokerage believes that the stock at its current valuation is pricing in good news and strong growth.
Shares of Escorts Kubota are trading 6 percent higher at Rs 2,151.70.
First Published: IST