On Road Price
Escorts Limited, one of India’s leading tractor manufacturers, reported 53% yoy growth in domestic tractor sales in February 2018. It sold 6,295 tractors in February 2018 against 4,104 tractors in February 2017. Export sales were up 17% yoy. Escorts exported 167 tractors in February 2018 against 143 tractors in February 2017. Total sales, which includes exports and imports, were up 52% yoy at 6,462 units. The number was marginally lower (-1%) than our estimate of 6,517 units for February 2018.
India Ratings and Research have forecasted 14-15% growth in tractor sales in FY18. However, it expects moderate growth in FY19 (number not specified), on a high base. According to the agency, two consecutive years of normal-to-good monsoons, improved crop production, easy availability of credit to farmers and increasing use of tractors in non-agricultural sectors are responsible for the growth of tractor sales in India. The sector also benefits from low penetration of tractors. About 20% of tractors are used for non-agricultural use. The government’s thrust on roads and highways development as seen in Bharatmala project would also be positive for the higher tonnage tractor segment and the players therein.
As per Q3FY18 numbers, Escorts derives revenue from agri-machinery (79%), construction equipment (CE, 15%) and railway equipment (6%). It is one of the leading tractor manufacturers in India with a capacity of 100,000 tractors/year. On the back of cost control measures and product mix, Escorts has seen steady improvement in tractor margins from 10% in Q3FY17 to 15% in Q3FY18. The tractor cycle is expected to remain favorable in India in the coming two years on account of improving farm sentiment. Its CE products include cranes, compactors and backhoe loaders.