Escorts
hosted a conference call on Oct 29, 2021. In the conference call the company
was represented by by Shenu Agarwal – CEO Agri Division, Ajay Mandhar -CEO Construction
Division, and Bharat madan – Group CFO.
Key takeaways of the call
Tractors
sales volume of the company in Q2FY22 in domestic market was down 18.2%
compared to 10.6% fall in industry.
However the exports sales volume of the company in Q2FY22 was higher by
65.2% compared to industry growth rate of 55.2%.
Strong
underperformance by the company in relation to industry in Q2FY22 volume sales
is largely as the company's strong markets of North and Central decline by 19%
whereas the West and South, where the company is not that strong decline by 3%.
Tractor
sales for the industry is expected to witness some decline in H2FY22 on high-base.
The company is expected its volume to be +/- 2% of the industry in H2FY22.
This
year the sowing and harvesting cycle has got delayed. The sentiment was weak during July-Sep 2021
period with delay in monsoon. But the situation on the ground is positive now.
With monsoon come back the reservoirs are full and credit availability is also
good. So the outlook is positive. Expect the month of November 2021 to be good with positive sentiment on ground and
customer who have not come and book are expected to come in the month of Nov
2021.
The
non-farm sales/demand of tractors that was subdued last year is witnessing
improvement. Though the demand & sales has not reached the normal levels
yet it is steadily improving this year and expect to reach normal levels in
next 6 months.
Tractor
market share of the company in Q2FY22 stood at 9% (down 80 bps from 9.8% in
Q2FY21 and down 170 bps from Q1FY22 level).
Decline in company's market shares for tractor is
due to higher industry growth in South and West regions in India, where the
company has less presence.
The
company maintains optimum level of inventory at channels as current period is
peak season for tractor sales. However the company continues to maintain lower
Inventory levels as compared to industry average. Expects
the inventory levels of the company to reach normal level by end of Nov 2021.
Rural
sentiment remains positive on account of monsoon recovery and easy credit
availability.
The
company has taken 3 rounds of price hike in Nov 2020, April 2021 and July 2021.
The price hike cumulatively works out about 7-8%. The company has pushed bac
the price hike scheduled for Oct 2021 not wanting to hurt the peak season sales
and likely to take a price hike of 3-4% once current peak season is over.
The
Farmtrac : Powertrac sales
ratio in Q2FY22 stood at 48:52 as
against 45:55 in Q2FY21 and 43:57 in Q1FY22.
Ratio of less than 40 HP tractors stood at 40:60
as against 37:63 in Q2FY21 and 40:60 in
Q1FY22. The company's higher HP
tractors increased in the last 3 years driven by new launches and deep and wide
market penetration.
Company
is witnessing encouraging developments in construction and railway equipment
segment too and is hopeful of a wider recovery soon.
Construction equipment (CE) volume sales in
Q2FY22 stood at 1074 units, a growth of 30.8%YoY and 77.2%QoQ compared to
15%YoY fall in volume of served industry for the same period. Sales volume of Backhoe Loader in Q2FY22 was
down by 22% due to emission change transition, the sales volume of crane and
compactor industry was up 19%YoY and 12%YoY respectively. Company
is expecting strong equipment demand in second half of FY22.
In
railway division, company is witnessing good traction. Order book of Railway
business division of the company as end of Sep 2021 was more than RS 310 crore
and this business is witnessing good traction.
Company's Railway Equipment Division (RED) recorded 6.2% growth on YoY
basis driven by higher sales from new products.
Company
expects EBITDA margins to be back to normal levels by Q3 FY22 as company is
planning to take price hikes in November.
Going
forward Management expects exports to improve on back of new product
development.
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