This tractor manufacturer expects its revenue to increase 2.5 times over the next five years

Although encouraged by the company’s medium-term track record, JPMorgan remains underweight the stock with a price target of Rs 1,551.

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To buy to sell Kubota Escorts to share

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.

In a presentation made at the ‘Escorts Kubota Investor and Analyst Meet 2022’ on Friday, the company said it was aiming for revenue growth of more than 2.5x from revenue of Rs 9,068 crore that it made during the 2022 financial year.

The company also said it expects the share of export revenue to reach 15-20% of total revenue in the next five years, up from nearly 6.4% currently. It seeks to become the leading tractor export led by India.

It also aspires to be a driving brand in the domestic tractor industry in terms of market share over the next five years. For fiscal year 2022, Escorts Kubota had a market share of 10.8%.

The target return on capital employed (ROCE), a term used to analyze a company’s profitability and capital efficiency, has been set at 25-30% from 17% currently.

To achieve these goals, 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 1.7 lakh tractors currently to 3 lakh tractors per year.

Additionally, the company has stated that it aims to be carbon neutral by 2050. It also maintains a goal of zero waste to landfill by 2026 and becoming a water-positive organization by 2030.

The company said the price hike was intended to offset the impact of cost inflation on both raw materials and other costs. The price increase varied across models and variants.

Although encouraged by the company’s medium-term track record, JPMorgan remains underweight the stock with a price target of Rs 1,551. The brokerage believes that the stock at its current valuation incorporates good news and strong growth.

Shares of Escorts Kubota are trading up 6% at Rs 2,151.70.

First post: STI

Sallie R. Loera