VST Tillers Tractors Ltd. share price target

Q3 revenue grew 29% YoY (-23% MoM) to ~Rs 2.2bn, driven by volume gain of ~34%, dragged by 4% lower realisations of Rs 0.27mn (YoY)

Q2 revenue was flat YoY at Rs 2.8bn, dragged by lower realisations of Rs 0.2mn down by ~1.3% YoY (13% MoM)

SIEM: Robust quarter, fresh capex announced. DIXON: Backward integration to fuel growth; maintain BUY. VSTT: Tepid performance; no major stress in the medium term. SOMC: Strong show in a challenging environment

Monthly Economic Buffet: Economic Round-up January 2024. SBIN: Pension one-off hurts profitability. JSTL: Progressing on expansion but valuations fair. ACEM: Healthy quarter, sustainability key; retain HOLD. ALPM: Healthy quarter; PAT beat on low tax rate. CPBI: Margin stress across segments. VSTT: Poor demand dampens performance

Q2 revenue grew 19% YoY as volumes climbed 16% and realisation moved up 3%

Q4 volume gains of 32% YoY helped by preponement of festive season and tiller & other non-tractor sales

FY21 Sales Volume Power tiller: 27,318 units, Tractor: 8,835 units Q1FY22 Results: The company reported robust Q1FY22 results. Power tiller sales volume for the quarter came in at 6,729 units (up 30%...

We remain positive on VST given its market leadership in power tiller segment domestically as well as penchant to grow in the higher hp tractor space and other farm machinery segment. Going forward, we build in sales, PAT CAGR of 14.4%, 8.5%, respectively. We retain BUY rating on the stock valuing it at | 2475, 20x P/E FY23 EPS (earlier TP | 2275). Capital efficient...

We are enthused by the underlying positive demand factors at VST and its ambitious vision to be a | 3,000 crore global brand by 2025 in diversified farm mechanisation products & solutions. We retain our BUY rating on the stock amid healthy B/S, CFO generation and resurgent return ratios matrix....

VST Tillers' (VSTT) Q2FY21 results beat estimates revenue surged 37% YoY to Rs 2.2bn and EBITDA margin came in at 17.1% (11.3% est.).

Farm sentiments are bullish with VST seeing healthy demand for its product profile. Key highlights from the call include: (i) VST expects tractor sales volume to grow ~10-15% in FY21E with power tiller sales volume growth guidance at 15-20% in FY21E; (ii) Noticeably, more and more farmers are buying power tiller on cash basis (~58-59% in July 2020) and not withholding purchase for want of state subsidies, a big positive surprise; (iii) VST is in final stages of negotiation for tie-ups in the contract manufacturing space for power tillers given the import restrictions (lower price points;...

We believe VST Tillers Tractors (VSTT) is poised for strong growth given its market leadership in power tillers (~50% market share), ready capacity, focused growth in tractors and debt-free status.

The EBITDA margin profile has been muted in the recent past amid material costs pressures and high provisioning for bad debts. The EBITDA margin profile has deteriorated quite significantly from being steady 15%+ till FY18 to 3.2% in FY20. With management guidance of worst behind them they foresee regaining the margin glory. Conservatively, we bake in 10% EBITDA margins for FY21E and 12% for FY22E. VST is also developing innovative solutions in the higher hp tractor segment and is hopeful of tasting success...

The VST Tillers & Tractors stock witnessed a sharp re-rating tracking the weak P&L; performance and consequent deterioration of return ratios in the recent past. Return ratios for VST have corrected from consistent 20%+ RoCE levels seen till FY18 to 11.5% in FY19. With limited margin improvement guidance, we foresee return ratios remaining below 10%, which is below our comfortable range. VST is a net cash positive company (cash & investments on books at ~ | 150 crore) but its incremental spend on new product development catering to the >15 hp crowded tractor space...

Background: Founded in 1967 the VST tillers & tractors is a key player in the domestic farm equipment industry. The company is engaged in the manufacture and sale of power tillers, tractors, rice transplanters, power reapers and auto components. In addition to domestic markets the company also exports its products to Africa, Russia, and Myanmar and component parts to UK & Europe. Promoted by VST Motors as a joint venture with Mitsubishi Heavy Industries Ltd, Japan, the company is largest manufacturer of Power Tillers in India with ~45% market share. The company operates through a network of ~250 dealers and 300 vendors all over India, who are associated with the company for decades. The manufacturing facilities...

Leader in power tiller segment, subsidy linked business prevails Power tiller is a farm equipment precursor to tractor used for agricultural activities. Given the higher share of small and marginal farmers domestically (~85%), we were of the opinion that power tiller segment will benefit from government thrust on farm mechanisation and be a preferred choice for domestic farmers given its price of ~| 1.25-1.5 lakh/unit vs. > | 2.5 lakh /unit for tractors. The segment, however, is highly dependent on government subsidies and, hence, has an uncertain outlook. VST is the market leader in...