Escorts, a Jhunjhunwala portfolio stock, falls for 2nd consecutive day and is down 14% YTD- Should you invest?

Escorts share falls for 2nd consecutive day!

Escorts share falls

The stock price of the company fell for the second straight day on the bourses. The company has reported a muted performance in the first quarter of the current financial year. In the first quarter, the net profit of the company came in at Rs 147.5 crores vs Rs 185 crores in the first quarter last year. The EBIDTA margin of the company fell as well, falling from 13.07% last year to 10% in the first quarter of this year. 

The muted performance in the first quarter is putting pressure on the stock price. The stock has been a multibagger in the past, and Rakesh Jhunjhunwala holds a 1.39% stake in the company. In the last 5 years, the company has given a CAGR of 19%. Earlier, it was outperforming the auto index. 

Related: This Rakesh Jhunjhunwala stock gives 15% CAGR over 20 years

Key triggers for the stock in the short term

There are various triggers which can give the stock its mojo back:-

  1. Japanese company Kubota Corporation is a co-promoter in the company, and the company has been renamed Escorts Kubota Ltd. The expertise and experience of the foreign co-promoter are expected to help the company. If there are any updates to the markets regarding the synergy benefits, the markets will price in the foreign promoter’s expertise.
  2. Steady rainfall can revive the tractor industry sales. 
  3. Construction and Railways are expected to perform well, and this can provide positive momentum to the stock. 

As per Dolat Capital, Kubota’s takeover will help the firm to substantially scale up its product portfolio, and its existing distribution network will help the firm scale up its operations. Dolat Capital values the stock at Rs 1957, and they have an Accumulate rating on the stock. The current market price of Rs 1633 implies an upside target of almost 20%. 

Related: Rakesh Jhunjhunwala: Top investing advice from the Mogul of Dalal Street

The stock price of Escorts Kubota Ltd has been a multibagger in the past, but a steady fall in the stock has put some negative thoughts in the investor’s minds. The company appears to be gaining from the new co-promoter, and this can provide an upward trigger to the stock. The company can benefit from the expertise of the new co-promoter. If the rains are good, tractor demand can increase and provide an upside trigger in the short term.

Also Read: This Rakesh Jhunjhunwala stock is down by 45%. Should you invest?

Operator game in escort - Reason? | Stock in focus 

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

M Stock

NEWSLETTER

Related Article

Premium Articles