Escorts Kubota is advancing its plans to establish a Greenfield manufacturing facility, to expand the company’s existing capacities to accommodate its future growth, the company informed the exchanges on Friday.
The farm equipment company has submitted an Investment Intent to the Government of Uttar Pradesh (GUP), seeking approval for land acquisition.
Escorts Kubota reiterated its plans of a phased investment estimated at Rs 4,500 crore or more.
In a move aimed to bolster its operations, the company plans to acquire approximately 250-300 acres of land which will facilitate additional tractor and engine manufacturing capabilities.
At full capacity, it is expected to generate an annual production revenue exceeding Rs 10,000 crore. Additionally, the facility aims to create direct and indirect jobs for over 14,000 people.
The expansion project is set to be implemented in phases starting from 2028 and financing for this venture via the proceeds from a previous preferential share issue to Kubota Corporation, Japan, along with its internal accruals. This investment intent is subject to receiving necessary clearances, it said.
Escorts Kubota, with an existing capacity of 1.70 lakh units for tractors and engines, including 50,000 units from its joint venture with Escorts Kubota India Private Limited, reported a capacity utilization of 66 percent for FY24.
Analysis
The Indian Auto Industry comes in the top 5 largest auto industries in the world. India is also a prominent auto exporter and has strong export growth expectations for the near future. The support from the government is providing the auto companies with a boost needed in their development. But will it sustain?
We can look into more details and dig a little deeper into the analysis of the stock of this sector. Escorts Kubota’s stock price today is Rs 3,854.75. Let’s look at how Escorts Kubota is performing and if it is the right time to buy the stock of Escorts Kubota with detailed analysis.
- The mainstream of revenue for the Auto Sector is their sales, Escorts Kubota has reported poor sales growth of 5.17 %, and in the latest quarter sales were Rs 2,292.54 Cr. To judge whether the company’s inventory is being sold or not and the sales picture is true, the inventory turnover ratio plays a major role, which is 7.89 times for Escorts Kubota. It is managing its inventory poorly
- Escorts Kubota reported Profit growth of 70.87 % over the year, where the latest year profit is Rs 1,037.15 Cr compared to the previous year of Rs 606.98 Cr. The new permits by governments and increasing demand will lead to an increase in profits in the coming year.
- The operating profit of Escorts Kubota in the latest quarter is Rs 327.11 Cr. It helps in measuring the company’s operating performance which is used to make financing decisions.
- Escorts Kubota has an average ROE of 11.77 %. The ROE is an important financial parameter because Auto companies work with high equity investments. Also, they have to take huge debt to incur the research and manufacturing work so their Debt to Equity ratio should be evaluated. Escorts Kubota has a low Debt-to-equity ratio of 0.
- Escorts Kubota pays a dividend of 18 Rs per share. It tells us that a company likes to share profits with its shareholders. The dividend yield is low at 0.47 %.
- The share of promoters in Escorts Kubota is high at 67.64 %, where the pledging is 0 %.
- What the market is willing to pay for the company for its earnings can be determined by PE multiple. The current PE of Escorts Kubota is 40.80 compared to the 5-year average PE of 27.30.
The stock gained momentum after breaching the consolidation zone’s resistance of 3910. Hence recommended ITM Call Option to grab further momentum.
