ESCORTS

Faces Market Share Pressure

has corrected ~16% in 2026, raising questions about whether steady tractor demand is enough to revive investor confidence. While industry growth remains robust, Escorts continues to trail peers like Mahindra & Mahindra in domestic volumes. Export momentum and Kubota integration provide medium-term support, but near-term risk-reward appears unfavourable. Demand & Market Share Trends Tractor industry grew 23% YoY in Q4FY26, supported by resilient rural demand, favourable monsoon, and rising mechanisation. Escorts’ tractor volumes rose 15% YoY in FY26, lagging M&M’s 24% growth. Industry expanded 20.4% in 9MFY26, while Escorts grew only 12.6%, reflecting market share pressures. Weakness driven by slower dealer expansion in high-growth southern/eastern regions (~34% growth in Q3) and gaps in the >40 HP segment. Exports & Kubota Integration Export volumes surged 63% YoY in Q3FY26, aided by Kubota’s global distribution. Approved ₹2,268 crore capex for a greenfield facility, targeting production by FY30. US and Europe remain key growth markets, leveraging India’s cost advantage and zero-duty access. Kubota profitability under pressure due to imported engines; localisation of India-specific Kubota platform expected in 1.5–2 years, improving margins. Financial Performance Agri-machinery revenues up 14.6% YoY, EBIT margins expanded 310 bps to 13.5%. Construction equipment volumes declined on a high base, though stabilisation is visible. Overall EBITDA margins expanded 203 bps YoY to 13.5%, supported by operating leverage and cost discipline. Rising commodity prices may pressure margins, though calibrated price hikes could offset. Outlook & Valuation Operational capacity and exports provide long-term visibility, but domestic share pressures and CE softness weigh on near-term growth. Valued at 22.6x FY28E earnings; Kubota synergies will play out gradually amid global market weakness.