Shares of tractor and construction machinery manufacturer Escorts Kubota Ltd. jumped over 4% on Tuesday after brokerage firm DAM Capital Advisors projected the stock to cross Rs 5,000 over the next 12 months.
DAM Capital gave a ‘buy’ call on Escorts, while raising the price target to Rs 5,100 from Rs 3,150 earlier. The revised price target implies a potential upside of 59% from Monday's closing levels.
After a meeting the company's management, DAM Capital noted that Escorts is focussing significantly on synergy creation from its merger with Kubota.
The firm said that the company is likely to see its market share expand through the synergies and the relative strength of both brands in their respective markets.
To recall, Kubota Corporation (Japan) had acquired a controlling stake in Escorts in November 2021 and became a joint promoter in the company along with existing promoters, the Nanda family.
DAM Capital said that Escorts is also expected to see healthy exports growth on account of new products and capitalising on Kubota’s global network.
The company’s margins are also estimated to expand through operational efficiency and localisation, the investment bank noted.
Meanwhile, Escorts Kubota is also boosting revenues from other segments of construction equipment and global material sourcing, while expanding the agri implements business, said DAM Capital.
DAM Capital projects Escorts Kubota to report a Compounded Annual Growth Rate (CAGR) of 17%, 37% and 41% for its revenue, operating profit and net profit respectively, over financial year 2023-2026.
Escorts Kubota’s valuation would expand closer to that of multinational companies, at around 30 times, on the back of healthy earnings growth, higher return ratios and a huge potential of expanding global footprint, according to the brokerage.
Shares of Escorts Kubota are trading 4% higher at Rs 3,323.95. The stock hit a record high of Rs 3,348.45. Shares have risen nearly 60% so far in 2023.
(Edited by : Hormaz Fatakia)
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