Brokerage firm Motilal Oswal Financial Services expects a 22% downside in the stock of Escorts Kubota even as it has a 'neutral' call on the stock with a target price of ₹1,575.
The stock has been on a roll of late. It hit its all-time high of ₹2,071.30 on September 2, 2022. A year ago, on September 2, 2021, it hit its 52-week low of ₹1,287.85. Since then it has jumped 61%.
Motilal highlighted the medium-term business plan (MTBP) of Escorts with three objectives:
1. Kubota to become the numero uno global Tractor manufacturer in terms of volumes.
2. Expand revenue and improve profitability in Kubota.
3. Promotion of farm mechanization globally.
The brokerage firm said by becoming Kubota's global production base, Escorts will be able to take advantage of its low-price cost structure (thus, ensuring higher profitability), and be able to supply Indian-made parts to factories across the globe.
Motilal said the MTBP extends to areas discussed in the past, with the only addition being the setting-up of an R&D centre in India.
"While these are steps in the right direction, some of these drivers will take time to reflect in its financials. We are not yet sure about the role Escorts will play in the sourcing of components (trading, manufacturing, or just facilitating). We await further details on investments, timelines, and targets if any," said the brokerage firm.
According to a MintGenie poll, an average of 21 analysts have a ‘hold’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of the broking firm. These do not represent the views of MintGenie.
