Microsec Capital has recommended 'Buy' on Escorts for target at Rs 193 as against the current price of Rs 130 with upside potential of 48%.

Commenting on the rationale, the stock broker said,"We rate Escorts  a Buy. It has played a pivotal role in the agricultural growth of India for over five decades. One of the leading tractor manufacturers of the country, Escorts offers a comprehensive range of tractors, more than 45 variants starting from 25 to 80 HP. Escort, Farmtrac and Powertrac are the widely accepted and preferred brands of tractors from the house of Escorts.

The company has shown robust growth in revenue during the quarter ended December, 2013. Revenue of the company has grown by 12.78% to Rs 11.60 billion in comparison to Rs 10.28 billion. EBITDA of the company improved from Rs 530 million to Rs 71 and PAT improved from Rs 28 to Rs 60 on back the higher tractors sales. 

At the CMP of Rs 130, the stock is trading at a P/E of 8x its FY14E EPS of Rs 16.28 and 6.5x its FY15E EPS of Rs 19.94. The company has sound business model and ROE is expected to pick up. We assign a P/E multiple of 9.7x to its FY15E EPS to arrive at a target price of Rs 193 for a time period of 12 months."

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