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Escorts Q1FY22 Result Analysis

Escorts Q1FY22 Result Analysis

Published on 12 August 2021 Views 18 Comments 0

Q1FY22 Standalone Highlights

  • Revenue from operations in Q1FY22 were 1,671.5 crores. Revenue saw a growth of 57.4% YoY but also witnessed a decline of (-24.4%) QoQ.
  • EBITDA for Q1FY22 stood at Rs. 233.2 crores, posting a growth of 95% YoY and a decline of (-32.3%) QoQ.
  • EBITDA margin stood at 14% in Q1FY22, the same for Q1FY21 was 11.3%. Improvement in volumes and volume mix contributed to rise in EBITDA margin. EBITDA margin for Q4FY21 was 15.6%.
  • Profit Before Tax stood at Rs. 246.1 crores and is up by 103.3% as compared to Rs. 121.1 crores same quarter previous year.
  • Profit after tax stood at Rs. 185.2 crores, registering a growth of 101% on YoY basis. PAT declined by (-31.7%) on QoQ basis.
  • Tractor volumes are up by 42.9% YoY to 25,935 tractors, highest ever for Q1 quarter.
  • Construction equipment sales are up by 159% YoY to 606 units.
  • Railway equipment division is up by 117.5% YoY to Rs. 119.4 crores.
  • The company remains net debt free.

Q1FY22 Consolidated Highlights

  • Revenue from operations in Q1FY22 were 1,701.8 crores. Revenue saw a growth of 56.2% YoY but also witnessed a decline of (-23.6%) QoQ.
  • EBITDA for Q1FY22 stood at Rs. 236.4 crores, posting a growth of 93.8% YoY and a decline of (-31.2%) QoQ.
  • EBITDA margin stood at 13.9% in Q1FY22, the same for Q1FY21 was 11.2%. EBITDA margin for Q4FY21 was 15.4%.
  • Profit Before Tax stood at Rs. 239.4 crores and is up by 96.8% as compared to Rs. 121.6 crores same quarter previous year.
  • Profit after tax stood at Rs. 178.5 crores, registering a growth of 92.8% on YoY basis. PAT declined by (-32.9%) on QoQ basis.

Argi Machinery Highlights

  • Tractor volumes for Q1FY22 stood at 25,935 units. Volumes grew by 42.9% YoY and declined by (-20.4%) QoQ.
  • Tractor industry volume for Q1FY22 up by 38.9% to 2.29 lakhs as compared to 1.65 lakhs YoY.
  • Positive macro-economic factors. Monsoon recovered well and Kharif sowing has caught pace. All time high Rabi crop procurement.
  • Most of the dealerships open and can fully serve customers.
  • Domestic tractor volume stood at 24,500 tractors in Q1FY22 as compared to 17,690 tractors in Q1FY21, a growth of 38.5%.
  • The share of >40HP tractors remains at levels of 60%.
  • Dealer inventory levels as per number of day of sales (30 days) is lower than industry average (45-50 days).
  • Dealer count in India currently at 1,100+.
  • In exports, industry was by 146.7% to 26.6k tractors as compared to 10.8k tractors YoY. Export volumes of Escorts went up by 212% to 1,435 tractors as compared to 460 tractors YoY.
  • Despite 3 price increases in last 3 months, inflation and raw material prices continue to put pressure on margins.
  • Emission norms for >50HP tractors which were supposed to come into effect from Oct 21 are postponed to Apr 22. For tractors which are over 25HP, the emission norms will come into effect from Apr 24.

Construction Equipment Highlights

  • Total volume grew up by 159% to 606 machines as compared to 243 machines YoY.
  • Revenue for the segment increased by 168.3% to Rs. 140.8 crores compared to Rs. 52.4 crores in Q1FY21.
  • EBIT margin was at (-2.3%) in Q1FY22 compared to (-32%) in Q1FY21.
  • The second wave of covid was more wide spread and severe compared to first wave.

Railway Division Equipment

  • Revenue went up by Rs 119.4 crores as compared to Rs. 54.9 crores inQ1FY21.
  • Sales of new products now contribute almost 63% to total products sold as compared to 43% in Q1FY21.
  • EBIT margin for Q1FY22 stood at 14.6% as compared to 2.6% in Q1FY21.
  • Indian Railways still not operating at full operation, cutting down their annual production which is affected fresh order tendering.
  • Order book for the division was upwards of Rs. 300 crores in June 2021.
  • The company is looking for inorganic growth in Railway division through M&A by using healthy cash on balance sheet for the same.

Other Highlights

  • Cumulative material cost increase is almost 10% to 12%. Inflation in the range of 7%-8%. The company has taken 3 price increases and passed on the all the inflation in absolute terms.
  • The company is experiencing inflation of about 2% in Q2FY22 and will be passed on at some time in Q3FY22.
  • Low single digit increase in the industry.
  • CAPEX guidance for this year will be close to Rs. 300 crores to Rs. 325 crores. Of that, Rs. 275 crores to Rs. 280 crores will be on tractor side.
  • No impact of semiconductor shortage on the business.
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