Neutral Escorts Ltd Target Rs.782 - Motilal Oswal
Beat driven by gross margin expansion; Outlook improving
largely priced in and expected 4QFY20 onwards
* Escorts' 3QFY20 performance is a reflection of stability in volumes, benefit of mix improvement and cost savings, all of which should sustain in the coming quarters. According to management, FY21 outlook has turned positive with estimated low single-digit growth.
* We upgrade our EPS estimates by ~9%/5% for FY20/FY21, but maintain our Neutral rating as we believe the expected recovery is already priced in.
Record-high quarterly margins led by mix and cost savings
* 3QFY20 revenues/EBITDA/PAT grew -1%/6%/15% YoY to ~INR16.3b/INR2.1b/INR1.53b. 9MFY20 revenue/EBITDA/PBT declined 4%/11%/18%, but PAT was flat due to lower tax.