ESCORTS SHINES BRIGHT

Escorts is an outstanding tractor maker which has a domestic market share of 10.3 % in FY 22. The company also provides domestic construction equipment and railways space.

Financials

Escorts had touched its lifetime high of Rs 2089 per share on 2nd September 2022. Later, this strong up move was subdued by the operators. Surprisingly, the stock bounced back up to a new lifetime high of Rs 2125 on 20th September 2022 with a strong breakout over its stagnation zone of Rs 1850.

Escorts is a stock which had found its place in Rakesh Jhunjhunwala’s portfolio. India has a huge population; our population needs to be fed and a majority of Indians are farmers. Perpetually, the agricultural sector will need the main farming equipment which are tractors.

The company will soon combine the tractor manufacturing entity and the agricultural machinery firm into Escorts Kubota Ltd.

For the first quarter of 2022, the company reported a consolidated total income of Rs 2067 crore which is up by 6.5 percent from the same quarter of the previous financial year. The company reported a net profit of Rs 148 crore in the first quarter.

Technical Analysis

Let us look at the chart of Escorts Kubota Ltd:

Escorts Weekly Candlestick Chart on Sharekhan’s Trade Tiger

Observe the retracement levels by plotting the retracement tool from the high of 2018 to the low of 2019. The stock had a breakout from the double top of Rs 1017 and achieved the next targets of Rs 1384 (161.8% level) as well as Rs 1979 (261.8% level).

We can observe a clear breakout over the 261.8% level which indicates that the stock will rise further to the 423.6% level which is at Rs 2940. However, the time period required to hit this target would be very long and it might not be possible in the medium term.

ICICI Direct has initiated a buy recommendation on Escorts with a target price of Rs 2390. The time period stated by the investment firm is about 1 year for the stock to achieve its target price. The reason behind the bullish nature is due to the company’s strength in farm machinery space with key monitorable being a medium-term growth plan.

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