Shares of Escorts Ltd rallied over 6 percent in the early trade on Thursday after the company’s December quarter earnings beat estimates driven by gross margin expansion.

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The scrip touched intraday high of Rs 796.70 on rising 6.48 percent against the previous close on the BSE.

At 10 am, the stock was trading 4.91 percent higher at Rs 784.95 on the BSE.

Escorts reported a 9.2 percent rise in standalone Q3FY20 net profit to Rs 153 crore against Rs 140.1 crore in the year-ago period, beating CNBC-TV18 poll estimates of Rs 125 crore.

Revenue was down 1.3 percent YoY at Rs 1,633.4 crore, but was above estimates of Rs 1,613 crore.

EBITDA during the quarter under preview rose 5.9 percent at Rs 212.2 crore versus Rs 200.5 crore and EBITDA margin expanded by 90 bps at 13 percent, YoY. Margins beat street estimates of 10.9 percent.

The company’s FY21 outlook turned positive. It now estimates low single-digit growth in FY21 as against earlier expectation of fall.

The company sold 25,109 tractors in the third quarter of fiscal 2020 as against 25,743 units in the corresponding period last fiscal. Agri machinery revenue remained flat at Rs 1,303 crore.

Construction equipment sales volume for the quarter was 1,044 machines against 1,413 units in the same period last fiscal. The segment’s revenue fell 18.5 percent to Rs 216.5 crore versus Rs 265.9 crore, YoY. EBIT was at Rs 10.4 crore while margin was reported at 4.8 percent as against 3.4 percent YoY.

Railway products division revenue was up 28.8 percent at Rs 124.4 crore from Rs 96.6 crore in last year quarter.

HSBC has maintained a ‘buy’ call on the stock and increased target price to Rs 900 from Rs 830 earlier. It believes improving growth and margin outlook should drive upgrades to estimates.