Confident Escorts Kubota can sustain 14% margin going forward: Bharat Madan

economictimes.indiatimes.com:

Bharat Madan, Whole-time Director & CFO, Escorts Kubota, says coming to railways section, this quarter was slightly higher because there were some better product mixes in this quarter and which clearly will not be there throughout the year. But 16-17% margin this year looks sustainable for the railway business too.Escorts came out with a very strong beat on the margins. What led to that? Secondly, is this sustainable? Do you see further upside on margins?The performance has been great across all three businesses.

Both on the volume front, in construction as well as railways, they have shown tremendous growth and the margins have also been expanded there. In tractor, even though growth was muted, it was more or less a flattish sort of market for us in the first quarter. But the easing of commodity prices helped in margin expansion and some cost-saving effort which the company has been taking reflected in the margin.

We think these are sustainable numbers from here onwards and we do not see a major challenge. We are seeing very good traction on the volume front, on the infrastructure side, both on the railway as well as construction. This will be something which can be sustained in the rest of the year too.14% margin is sustainable but do you think it can go back to that 16-18% range because historically we have seen that?Well, let us see.

A lot will depend on the operating leverage for the margins to expand further and how the commodity prices move. As of now, we are looking at a stable position on the commodity side. We do not see any significant volatility there…We want to discuss a bit more about the railway segment because it was a smaller part of the business but it is scaling up quite well. Where do you see it