Escorts Kubota - Transforming For Enduring Growth: ICICI Direct
Reveals mid-term growth plan largely leveraging Kubota’s strengths.
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ICICI Direct Report
We recently attended Escorts Kubota Ltd.’s analyst meet in Faridabad wherein the company revealed its mid-term business plan. Key highlights, FY28 targets:
aspiration to grow revenues to more than 2.5 times of FY22 levels (i.e. ~Rs 22,500 plus crore in FY28E, implied compound annual growth rate of 16.5%+);
increase share of exports from ~6.4% in FY22 to ~15-20% in FY28E;
target Ebitda margins to mid-teens;
return on capital employed at 25-30% and return on equity more than 18%.
within segments, agri segment is expected to grow by 2.5 times; construction equipment is expected to grow by two times; whereas railway division is expected to grow by three times by FY28E riding on new products under development.
Escorts Kubota also shared firm capital allocation strategy wherein Escorts Kubota will invest up-to 5% of net profit for research and development, innovation for new technologies; cash return to shareholders in the form of dividend plus buyback at up-to 40% of net profit.
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