Shares in leading truck manufacturer Escorts despite the Covid 19 gloom and disruption between March end and until sometime in June due to lockdown, managed to reap significant gains for its investors to the tune of 109% i.e. almost doubling their wealth.
Since March lows of Rs. 542.65, the stock has now scaled to Rs. 1129.45 at the closing on July 9, 2020. And since last two days, the stock has been making new 52-week high.
In the previous day, the stock hit a 52-week high price of Rs. 1134.35 per share on the BSE.
Growth in sales as well as strong demand plus the rural economy are the prime reasons for the sharp spike in the company's share price.
Sales of Escorts In June
The disruption in the economy has caused no impact on tractor sales. Infact the rise in demand for agri-commodity has only provided it a fillip. In comparison to May sales figure as also the sales of the corresponding month last year, tractor sales at the company jumped significantly i.e. 64.5% on a month on month basis while 21.2% on a yearly basis to 10,851 units.
"We have seen unprecedented demand in this month. The industry is expected to grow significantly backed by pent-up demand of the lockdown period, better farmer sentiment due to good monsoon prediction reflected in better than normal Kharif sowing, better rural cash flows owing to record crop output and crop prices, and reasonably good availability of retail finance," the company said in a regulatory filing.
MF Investors And Rakesh Jhunjhunwala Investors In Escorts Stock
As at the end of March 31, 2020 quarter, a total of 28 mutual funds held close to 10% stake in the firm. Also, ace investor Jhunjhunwala is also invested in the firm having 91 lakh shares or 7.42 percent stake in Escorts.
Brokerages' Take On Escorts Stock
Brokerages including the likes of Edelweiss are bullish on the stock and see a further upside of 17% with a target price of Rs. 1332."Given the strong traction in the rural economy on the back of a bountiful crop season last year, supported by increase in the minimum support price (MSP), expectation of a plentiful monsoon this year and healthy reservoir levels, we expect the start of next tractor upcycle to last for another two years," noted the brokerage.
Also, the company highlighted that stake purchase deal by Kubota will strengthen the company's balance sheet
The rural sentiment is likely to reflect in tractor sales, which likely normalised to pre-pandemic levels in June, said analysts from Nomura, Emkay and Motilal Oswal.
Worth mentioning, here that two-wheeler and car sales in the month of June have been triggered by the rural economy.