Brokerage firm CLSA has maintained its ‘Outperform’ rating on Escorts Kubota Ltd., with a target price of ₹4,000, citing a better-than-expected EBITDA margin in Q1FY26, supported by softening raw material prices. The stock last closed at ₹3,397.60, implying an upside of over 17%.
Margin beat and segment transition impact
CLSA highlighted that the margin beat in the June quarter was primarily driven by lower input costs, though the company indicated that mild metal inflation is being observed in Q2. Additionally, Escorts completed the transfer of its Railway Equipment Division business to Sona BLW in Q1, and the one-time gain from this divestment was recognised as income from discontinued operations.
Positive outlook on tractor cycle
Escorts remains optimistic about the ongoing tractor upcycle, expecting the overall industry to grow at a mid-to-high single-digit pace in FY26. The company has launched its Powertrac series and has plans to introduce wetland tractors under the Farmtrac series, aimed at increasing its penetration and boosting market share gains.
CLSA believes that the favourable product mix, improving industry dynamics, and new product launches will support earnings momentum through FY26.
Brokerage view summary:
| Brokerage | Rating | Target Price | Key Takeaways |
|---|---|---|---|
| CLSA | Outperform | ₹4,000 | Margin beat in Q1, tractor industry growth outlook healthy, new launches to aid market share |
Disclaimer: This article is based on brokerage reports and is for informational purposes only. It does not constitute investment advice. Investors should consult their financial advisors before making investment decisions.
