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Escorts share worth goal Rs 1420 and stop-loss Rs 1140 says ICICI Securities

Escort share price today: Ace investor Rakesh Jhunjhunwala holds nearly 4.8% stake in Escorts. The ACE investor believes that the growth of the rural economy will benefit tractor manufacturers like Escorts. The share price of the manufacturer of agricultural and construction machinery Escorts stands today at Rs 1209, which is a decrease of Rs 38 or 3.1%. The price of the Escort share has dropped from 1225 to 1209 rupees in the last week.

Technical analysis on escorts:

According to ICICI Securities, Escorts has seen healthy higher base education in a rectangular consolidation pattern for the past four months after a staggering rally in fiscal 20. It is currently seen to make a potential triple bottom on the rising 52 week EMA (currently at Rs 1177) as it is the previous almost identical lows of December 2020 and February 2021 which are at Rs 1180. Therefore it offers a new entry possibility with a favorable risk-return. The stop loss with escorts is Rs 1140

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ICICI Securities expects Escorts to resume its primary upward trend and gradually move towards the 1420 rupee level in the coming months. The most important point to highlight is that in the last 19 weeks, Escorts has traced less than 80% of the previous 14-week upward movement from 1078 to 1452 rupees.

Basics about escorts:

ICICI Securities points out that Escorts has significant exposure to the rural economy through its tractor division, in which it is a leading player and has a 11.4% domestic market share. From the 9MFY21 onwards, Escorts achieved 83% of its sales in the tractor segment. The rest was accounted for by construction machinery (10% of sales) and railways (7% of sales). The domestic tractor room resisted the downward trend of the entire automotive industry in FY 21 and recorded double-digit year-on-year growth.

According to ICICI Securities, the tractor room is currently enjoying medium and long-term supportive tailwinds. Rural cash flows remain relatively strong due to high crop production and sourcing, while the government continues to focus on doubling farm incomes and improving rural infrastructure.

According to ICICI Securities, in addition to continued strength in the farm equipment category, Escorts is also expected to benefit from improved assets in the construction equipment segment. Demand in key economic sectors such as mining, construction, road construction and infrastructure has increased in recent months and sales of serviced construction machine bags, e.g. B. Pick-n-Carry cranes (for material handling) and backhoe loaders (for earth moving) and compactors (for road construction).

According to ICICI Securities, Escorts is one of the world’s largest manufacturers of hydraulic pick-n-carry cranes. The rail equipment business had an order backlog of> £ 330 billion as of the third quarter of FY21 with expected exports over the next six months. However, a sharp rise in raw material costs, a normalization of the product mix within the tractors and a high import content in the rail equipment division will weigh on mixed margin performance in the coming quarters. An ongoing strength in tractors, a surge in construction equipment prospects, a healthy balance sheet, and strategic investments from Kubota Corporation are positive factors for Escort.