On Road Price
Escorts reported strong tractor sales numbers for the month of January 2018. Total tractor sales for the month of January 2018, including both exports and imports, was up 45.6% yoy led by 47.1% yoy growth in the domestic business. Total tractor sales for the month stood at 5,316 vs. 3,652 for January 2017.
Domestic sales were at 5,160 units in January 2018 vs. 3,507 units in January 2017, while exports were at 156 units against 145 units over the same period.
Year-till-date (YTD), the total, domestic and exports sales volume grew 18.5%, 17.5% and 78.7% on yoy basis respectively.
Escorts derives revenue from the agri-machinery segment (80%), construction equipment (CE, 14%) and railway products (6%). It is one of the leading tractor manufacturers in India with capacity of 100,000 tractors/year. Its CE products include cranes, compactors and backhoe loaders. The company aims at increasing CE products contribution to 18-19% on the back on new rollouts.
The tractor cycle is expected to remain favorable in India in the coming two years on account of improving farm sentiment. This is because of back-to-back years of normal monsoon coupled with higher rural spends by the government. New launches and geographical penetration in the tractor segment along with higher traction in construction equipment segment (road and infra spends) is expected to drive ~15% revenue CAGR over FY17-20E. The company is witnessing improvement in CE performance and aided by restructuring initiatives, we expect PAT to grow at 43% CAGR over FY17-20E.