Escorts is an Engineering Company based in India. It manufactures Agricultural Equipment like Tractors. Tractor manufacturing is one of the prime business vertical of Escorts. Along with Agricultural Equipment it also creates Construction Equipment and Railway Equipment.
These three are major division of the company. Escorts Group is largest manufactures of Air brakes systems and Air brake accessories of Asia. This is used in Railways. So any order from Railways will benefit the company.
In Agricultural Machinery division it also creates Gensets and Engines apart from Tractors and Tractor accessories. Under construction business it creates construction equipment like Cranes and Road rollers among others.
This diversified portfolio of items have worked well for the Company.It has removed dependence on any one division. All these sectors except the Air Brakes one have decent competition as well. Air brakes also has competition but Company being the largest player in the region works in favor of the company.
For example in Tractors area you have Swaraj tractors as well (which is Mahindra Group of Company). In Construction equipment field you have the giant Larsen and Toubro. Now lets see how well company have performed over the years despite operating in competitive segment.
Escorts Stock performance
Stock price is the ultimate yardstick for judging performance of a company. We will see how well the company have performed over the years in below share price chart.
As you can see above the share price of the company was hovering between 50 to 200 mark from year 2002 to year 2016. During this period it once touched level 200 for very short period. The company gave tremendous returns after that period only.
From year 2016 it moved past 200 and ran wildly to 1000 mark. This ran was frenzy and if you see stock prices of most companies have gained in this period. One who has invested in this period have made fortunes in this company.
The highest stock price for this company is around 1,000. It has just touched this tip and then the prices are declining over the period of time. Currently it is trading at 600 which is also good return from 200 mark.
It has to be seen how the prices behave once the market gets corrected as well.But overall it has made money for investor even though most of the return came after year 2016 only.
Escorts My Opinion
The ace investor Rakesh Jhunjhunwala has invested in Escorts. This one factor makes it special company and this is the reason I have analyzed this company here as well.
Escorts have performed well for investors. It has made most of the returns in recent years only.The early period was see saw type of years. The stock prices fluctuated between two ranges and people buying at lower ranges made money.
However personally I do not see any moat in this company. The only attractive feature is being the largest company in Asia for Air Brakes systems and Air brakes components.
Apart from it as mentioned above the other two division have good competitors as well. Those two are also huge companies and going forward the market share battle will be interesting.
This is one reason I am not that convinced in this company but presence of ace investor in this counter does give a comfort to look into more details
There are not many Indian companies doing Tractor Manufacturing or in Air brakes system. The divisions it operate are pretty much have two or three major players. These players are also big companies and have good presence in the market.