Over 3-Fold Increase In Profitability For Escorts In June Quarter

Escorts announced its numbers for the quarter ending June 30, 2013 on August 14. These came in robust because of the momentum in sales and the boost seen in its profitability. The company’s share prices appreciated by 19.96% to Rs 88.65 today.

In Q3FY13 (see note below), the company saw revenue growth of 15.99% to Rs 1175.93 crore. This was mainly on account of its performance in the tractor business.

84% of Escorts’ revenues come from the sale of tractors, and in this quarter it saw volumes growth of 21.4% to 19518 in its tractor sales. This led to a 24.87% growth in revenues from this segment, which pushed up its overall performance. The company introduced higher HP products and tractors for specialised needs, which contributed to its growth. It also saw significant growth in its railway equipment business.

In addition, Escorts operates in the business of construction equipment, which contributes to 10% of total revenues. This saw a decline of 31.56% to Rs 109.29 crore. The subdued performance was mainly on account of a slowdown in the industry and a consequent drop in volumes. The company’s auto ancillary business too declined by 10.34% to Rs 37.37 crore.

In the quarter, its EBITDA grew by 71.57% to Rs 92.75 crore. An increase in volumes, a healthier product mix and better price realisation saw its profitability go up. The company also took cost saving measures across all verticals, which did their own bit to chip into the numbers.

Higher other income, lower finance costs and higher exceptional items took Escorts’ PBT higher by 141.38% to Rs 72.27 crore. Its net profit also grew by 215.65% to Rs 58.3 crore.

An increase in volumes is an indication of healthy demand. The rise in volumes for this quarter can be attributed to a good monsoon. Tractor sales seem to have improved across all players, indicating an overall improvement in demand. We believe that this segment will continue to support the growth of the company. The adverse macroeconomic conditions, however, will see the performance of its construction equipment segment remaining subdued.

Note: All comparisons are made on a year-on-year basis

Escorts follows an October-September fiscal year, making the quarter ending June 30, 2013 Q3FY13