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MOSL: ANNUAL REPORT THREADBARE (ART) | ESCORTS FY18-Performance improves across all segments

ANNUAL REPORT THREADBARE (ART) | ESCORTS FY18: Performance improves across all segments

 

ESCORTS (ESC) FY18 annual report highlights another year of robust operating performance with EBITDA surging 79% to INR5.5b on healthy growth across business segments. Consolidated revenue grew 22% to INR50.6b, while EBITDA margins expanded 347bp to 11%. Agri equipment business continued its growth trajectory with revenue growing 18% to INR40.1b and EBIT margins expanding 330bp to 13.6% on better volumes. Performance of construction equipment/railway equipment business improved with revenue growth of 29%/18% and EBIT margins expanded 420bp/120bp to 2%/14%. Rise in profitability margins to 7% from 4% in FY17 led to an increase in RoE to 18% from 11% in FY17. Operating cash flow post finance costs increased 60% to INR4.4b (FY17: INR2.8b) with earnings-to-cash flow conversion at 102%, despite a significant increase in other assets aided by rise in trade payables. Payable days increased to 133 days from 117 days in FY17, thereby leading to overall Cash Conversion Cycle (CCC) at -29 days v/s -19 days in FY17. Cash & investments were high at INR9b (40% of NW) v/s INR4.7b (29% of NW) in FY17, yielding 6% (excl. forex gain). Promoter holding stands at 40% which includes ~27% held through treasury shares.

Op. performance strong, margin expansion continues: Tractor volumes for ESC grew 26% from 63.8k units to 80.4k units in FY18, primarily aided by easy access to retail finance and subsidy support in some states. This led to a rise in Agri equipment’s revenue by 18% to INR40.1b, taking overall revenue growth to 22% at INR50.6b. EBITDA margins have continued to expand and stood at 11% (FY14: 6%) on back of improved gross margins and operating leverage.

Rising trade payables aid operating cash flow: Operating cash flow generation has been strong for the past three years, with earnings-to-cash flow conversion remaining above 100% aided by rising trade payable days. OCF has increased from INR2.2b in FY16 to INR4.6b in FY18 aided by rising trade payables. This has also resulted in reduction in Cash Conversion Cycle, which stood at -29 days from -9 days in FY16 with payable days rising to 133 days from 115 days in FY16.