Expanded Exports And Kubota Integration Will Transform Agri Markets

Key Takeaways

• Expansion of exports and tailored products for new regional markets support sustained revenue growth, margin improvement, and market share gains.
  
• Focus on high-margin after-sales services and Kubota integration boosts earnings stability, technology access, and reduces revenue volatility.
  
• Weak regional performance, supply chain reliance, rising input costs, and stalled reforms threaten both margin expansion and long-term growth outside of core tractor offerings.

Catalysts

Manufactures and sells agricultural and construction equipment in India and internationally.

• Robust multi-year growth in tractor exports-driven by channel integration with Kubota's global network (notably Europe and 80+ countries), plans to increase exports from 5–6% to 15% of revenues in 4–5 years, and India becoming a manufacturing/export base-directly supports higher topline growth and export-led margin accretion.
  
• Acceleration in new product introductions (PROMAXX, Kubota MU series, wetland tractors for paddy, phase 2 launches), specifically tailored for previously underpenetrated southern and eastern Indian markets, positions the company to regain and expand market share-supporting future revenue growth and improved operating leverage.
  
• Ongoing expansion of high-margin after-sales spares and service business, now comprising roughly 10% of segment revenue, provides recurring revenue streams that bolster net margins and earnings stability.
  
• Stronger farmer sentiment, rising rural incomes, and favorable government policies (capex, rural infrastructure) underpin sustained demand for agri-machinery-expanding addressable market and creating a long runway for volume and revenue growth.
  
• Integration with Kubota brings access to advanced technology, process efficiencies, and broadened export opportunities; these synergies are expected to diversify earnings, improve margins, and reduce cyclicality in revenues over the medium to long term.

Escorts Kubota Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Escorts Kubota's revenue will grow by 14.9% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 12.1% today to 10.7% in 3 years time.
• Analysts expect earnings to reach ₹16.5 billion (and earnings per share of ₹146.8) by about September 2028, up from ₹12.3 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 34.8x on those 2028 earnings, up from 33.5x today. This future PE is greater than the current PE for the IN Machinery industry at 32.3x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.53%, as per the Simply Wall St company report.

Escorts Kubota Future Earnings Per Share Growth

Risks

• Regional disparities in tractor industry growth-particularly the company's historical weakness in South and East India-have led to a decline in market share despite new product launches; if these disparities persist or new products fail to gain traction, long-term revenue growth may be impacted.
  
• Delays in land acquisition and construction of the new UP plant could hamper expansion plans, restricting planned capacity increases and the ability to use India as a global production base for Kubota, affecting long-term export revenue growth targets.
  
• Heavy dependence on outsourced sourcing for key product segments (such as farm implements, harvesters, and engines, much of which are imported rather than manufactured in-house) exposes Escorts Kubota to supply chain risks and limits margin expansion over the long term.
  
• Rising input commodity costs (especially steel and metals) are already leading to margin pressures, as noted for upcoming quarters; if these cost increases are not fully offset by price increases or localization, sustained net margin compression is likely over multiple years.
  
• Farm implement penetration and automation remain slower than expected, with the OEM segment still dominated by smaller non-OEM players and requiring significant government land and labor reforms; if these reforms remain stalled, long-term adoption of advanced farm equipment-and thus Escorts Kubota's non-tractor segment revenue and earnings growth-could underperform expectations.

Valuation

• The analysts have a consensus price target of ₹3442.895 for Escorts Kubota based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹4101.0, and the most bearish reporting a price target of just ₹2670.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹154.3 billion, earnings will come to ₹16.5 billion, and it would be trading on a PE ratio of 34.8x, assuming you use a discount rate of 14.5%.
• Given the current share price of ₹3677.5, the analyst price target of ₹3442.89 is 6.8% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.