ESCORTS - Escorts Kubota Limited Share Price

Escorts Kubota Limited's management provided an optimistic outlook for FY26 during the earnings call held on May 8, 2025, anticipating growth driven by favorable economic conditions. Key points include:

1. Tractor Industry Growth: The management expects mid-to-high single-digit growth in the tractor sector, projecting industry volumes to potentially reach the highest ever around 1 million units. Factors supporting this outlook include a good rabi harvest, increased crop prices, and predictions of above-normal monsoon levels.

2. Export Growth: The company aims for a 20-25% increase in export numbers for FY26. This growth is attributed to expanding into new markets including Mexico and Southeast Asia, with ongoing improvements in product offerings.

3. Financial Performance Targets: The management anticipates a sustained EBITDA margin for FY26 similar to FY25, with expectations for slight improvements driven by operational efficiencies and potentially reduced commodity costs.

4. Strategic Initiatives: They're focusing on product launches tailored for southern markets and improving coverage in white spaces across various regions. Specific new products are planned for rollout in Q2 and Q3 FY26.

5. CapEx Plans: For FY26, the estimated capital expenditure is projected between Rs. 350 crores to Rs. 400 crores, with additional investments anticipated for land acquisition, totaling an expected outlay of about Rs. 800 crores.

6. Construction Equipment Outlook: Management expressed a cautious yet optimistic view on the construction equipment sector, projecting a recovery in demand in the latter half of FY26, supported by government infrastructure spending of Rs. 11.21 trillion.

Overall, Escorts Kubota Limited's management highlighted confidence in both tractor and construction equipment segments. By combining market-focused product developments and strategic geographical expansions, they aim to enhance their market share and profitability moving forward.

1. Question: "Sir, firstly, on the tractor industry growth outlook for this year? And also sir, how have you been seeing the response for the new Promaxx Series? And going ahead, what are the focus area for the new launches?"

Answer: The industry outlook remains positive with expectations of growth in both the upcoming quarter and the entire year. As for the Promaxx Series, it's early to gauge its performance as we're yet to hit the peak season, but initial feedback has been encouraging. Looking ahead, we plan to launch Powertrac targeted at southern markets in Q3 and a mid-segment Kubota product in Q2. These will enhance our offerings and drive growth.

2. Question: "So how do you see the growth for FY26 sir for exports?"

Answer: We are projecting a growth of approximately 20% to 25% for exports this year. Our recent performance shows a strong upward trend, and we believe this momentum will continue, driven by our expanding market presence and increasing product availability in key export regions.

3. Question: "What is the status on the Greenfield plant in UP?"

Answer: We have completed the land acquisition and are currently undertaking necessary internal assessments related to soil and infrastructure. The UP government supports swift progress. We anticipate commencing construction post these evaluations, aiming for operational readiness around fiscal year 2028.

4. Question: "How is the dealer inventory for the tractor?"

Answer: The dealer inventory is currently maintained within the range of four to five weeks. This level allows us to manage supply effectively while accommodating market demands without overstocking.

5. Question: "What is your strategy on the construction equipment side given the declining sales?"

Answer: We are focused on leveraging our existing strengths while addressing weaknesses, especially in segments like backhoe loaders. We aim to introduce a new modular platform developed recently to revitalize this segment and improve market share. Despite the industry's challenges, we anticipate recovery driven by increased government spending and strong infrastructure development in the coming years.

6. Question: "Can you share your strategy on the export front, particularly regarding component exports?"

Answer: Our target is to double exports from approximately Rs.100 crores this year. The potential exists for substantial growth, and we are working closely with suppliers to meet international standards. We expect growth, particularly as more components shift from global sourcing to local production over the next few years.

7. Question: "If you can talk about the emission regulations and potential impacts on our products?"

Answer: The previous timeline for implementing stricter emission norms was April 2026. However, we do not expect these to be enforced on schedule due to ongoing discussions. We are actively monitoring the regulatory landscape and are preparing our products for anticipated changes, ensuring we maintain compliance while keeping our cost structure manageable.

8. Question: "What is the expected CAPEX for FY26 and if you can provide guidance for FY27?"

Answer: We anticipate a CAPEX of Rs.350 crores to Rs.400 crores for FY26, plus an additional Rs.450 crores to Rs.500 crores for land-related expenses, summing approximately Rs.800 crores. For FY27, the CAPEX outlook will depend on market conditions and volume growth, which will guide our investment decisions.

9. Question: "What about the new captive finance company and its market impact?"

Answer: We have invested Rs.60 crores thus far and project the total equity investment to reach Rs.700 crores over time. While it will take a few years to build significant traction, the goal is for it to help customers finance purchases, which may eventually enhance our overall market share by facilitating easier access to financing options.

10. Question: "What's your view on margin improvement for the Agri Machinery segment?"

Answer: We're seeing improved margins in our domestic business, yet pressures remain, especially with imported components. While we aim for gradual improvement, significant advancements may come once we achieve greater localization. For now, we expect margins to remain stable, with potential slight increases based on commodities stabilization.