📌 At a Glance
Escorts Kubota looks like a tractor company on the outside — but inside, it’s a three-cylinder combo of agri equipment, rail parts, and mystery profits from ‘other income’. While margins have improved and the stock’s revving up again, is it worth ₹3,200? Or are you just buying a dividend with a side of engine oil?
🧱 1. Business Breakdown: Tractors, Excavators, and Indian Railways Walk Into a Bar…
Escorts Kubota’s business is now powered by three distinct revenue engines:
| Segment | FY24 Revenue Share |
|---|---|
| 🚜 Agri Machinery | 70% |
| 🏗️ Construction Equip | 19% |
| 🚆 Railway Equip | 11% |
- In Agri, they sell tractors, engines, implements, spare parts, lubes.
- In Construction, it’s loaders, compactors, cranes.
- And in Railways, they’re supplying brake systems, couplers, and suspension kits to Indian Railways — i.e., your train stops because of them.
💰 2. Financial Horsepower: Is It Racing Ahead?
🔢 Key Financials (Consolidated)
| Metric | FY23 | FY24 | FY25 (Est.) |
|---|---|---|---|
| Revenue (₹ Cr) | 8,429 | 8,850 | 10,244 |
| Net Profit (₹ Cr) | 637 | 1,049 | 1,265 |
| OPM (%) | 9% | 13% | 11% |
| ROE (%) | 8% | 12% | 11.5% |
| Dividend Yield | 0.86% | — | — |
📈 3-year Profit CAGR: 16%
⚙️ ROCE: 14%
🛢️ Other Income in FY25: ₹601 Cr — that’s nearly 47% of reported PBT 😬
This ain’t just from selling tractors — this is interest income meets investment gains show.
🧮 3. Valuation: Kubota Ka Price Kitna Hai?
| Metric | Value |
|---|---|
| EPS (FY25) | ₹113 |
| P/E | 32.3 |
| Book Value | ₹927 |
| P/B Ratio | 3.51x |
| Market Cap | ₹36,365 Cr |
Let’s assume a fair P/E range of 18–25x based on peers and cyclical nature of agri & infra spending.
🎯 Fair Value Range:
- Low Case: ₹113 EPS × 18 = ₹2,034
- High Case: ₹113 × 25 = ₹2,825
🧨 CMP = ₹3,252 → Escorting you straight out of the “value zone.”
🛠️ 4. The Kubota Effect: Japan Meets Karnal
- In 2021, Kubota Japan took majority control of Escorts — now owns 68% of the company.
- Post-merger, they renamed it Escorts Kubota Ltd, brought in Japanese efficiency, and have global R&D input.
- Kubota sees India as the manufacturing hub for global tractors — which might drive export-led growth.
So yes, this is no longer the “desi tractor stock” you ignored in the ’90s.
🧠 5. Other Income — Legit Returns or Financial Flex Tape?
This part needs its own segment.
| Year | Other Income (₹ Cr) | % of PBT |
|---|---|---|
| FY23 | 228 | 27% |
| FY24 | 415 | 30% |
| FY25 | 601 | 47% |
If you remove this, core operating profit looks… meh.
Translation: A decent chunk of profit is coming from treasury ops and investments — not from tractor sales. If this dries up, so will margins.
📦 6. Key Positives
✅ Debt-free and cash-rich
✅ ROCE improving, margins stabilizing
✅ Strong promoter (Kubota) with global backing
✅ 3-year EPS CAGR: 25%
✅ Construction & Railway segments seeing growth
🚩 7. Red Flags
❌ Stock price is down ~23% in 1 year — despite profit growth
❌ Working Capital Days ballooned from 31 → 127
❌ Highly dependent on monsoon + government infra push
❌ P/E is rich if you strip out ‘other income’
If you just look at EPS and ignore the details, this looks like a 2-cylinder Porsche. But open the hood — it’s part tractor, part treasury desk.
🥲 TL;DR: Buy for the Dividends, Stay for the Debt-Free Drama?
Escorts Kubota is no longer a one-trick tractor pony:
- 👨🌾 It’s diversifying into construction & railway
- 🧾 Financials are good, but over-reliant on other income
- 📉 Stock is correcting after peaking at ₹4,400 — now down 25%
- 🎯 Our Fair Value = ₹2,034 – ₹2,825
Great company. Slightly expensive stock. Fully loaded financials.
Your move, investor.
✍️ Written by Prashant | 📅 19 June 2025
Tags: Escorts Kubota, tractor stocks, Japanese MNCs, Kubota India, agri equipment, dividend stocks, railway stocks, fair value analysis, EduInvesting funny analysis, construction equipment sector
