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Jesus said, "Except ye eat the flesh of the Son of man, and drink his blood, ye have no life in you," (John 6:53).

27 Jan 2019


Escorts (EL) is the third largest agricultural tractor manufacturer in India. It has a strong presence in the north and west, with an overall market share of 11 percent as on FY18. Q4 FY18 revenue grew 41 percent YoY led by a 57 percent and 49 percent growth in tractor and construction equipment vehicle sales, respectively.
A normal monsoon and more state subsidies for doubling agricultural growth will continue to drive demand for tractors. We expect revenue and the net profit to post a CAGR of 16 percent and 34 percent over FY18-20e led by robust volume growth and superior product mix. The stock is up 11 percent YTD.

Q4 FY18 profitability was impacted by higher discounts due to competition and a rise in fuel cost. The impact seen on earnings in Q4 FY18 is not likely to continue as we expect a passthrough of higher fuel cost leading to margin improvement. Considering Indigo’s fuel-efficient fleets, market leadership position, aggressive capacity addition and healthy balance sheet, we continue to maintain our positive view on the stock.
We expect earnings to grow by a healthy 20 percent CAGR over FY18-20e. The stock price has corrected 30 percent from its recent high of Rs 1,520 per share. We believe near term concerns are already factored in the stock’s price

Amara Raja Batteries (ARBL) is India’s second largest lead acid battery manufacturer and continues to be preferred supplier to original equipment manufacturers due to its excellent track record and robust capex plan. Q4 FY18 revenue grew 18 percent year-on-year, which was largely driven by strong automotive growth. We expect buoyancy in the automobile sector to continue due to capacity expansion by major OEMs owing to favourable macro opportunities.
Revenue is likely to grow at a compounded annual growth rate of 15 percent over FY18-20e due to normalisation of business in the industrial segment, higher auto sales and price hike taken to offset elevated lead prices. The stock has fallen a little over 7 percent in 2018.

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