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Dolat Capital Report
Escorts Kubota Ltd. displayed strong margin performance led by softening commodity prices and margin expansion in construction business.
Although near term tractor demand to be muted, expect Escorts to outperform led by merger of Kubota trading entity with Escorts' and opening up of new export opportunities.
Management expects demand momentum to be decent and forecasts +2/- 2% growth for the tractor industry in FY24. For Escorts dealer level inventory are at decent level and stands at -4.5-5 week and focused on retail growth.
We maintain our positive view led by an increase in network and product lineup up with the help of Kubota Global and strong midterm guidance.
We increase earnings per share by 8/14% for FY24/25E due to incorporating positive impact of Amalgamation of Kubota trading entity and value the stock Rs 3578 (25 times FY26E EPS). Maintain 'Accumulate'.
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