Analysts retained their bullish views on VST Tillers and Tractors (VSTT) after it posted a profit of Rs 12.93 crore for the quarter ended March 31 against a loss of Rs 3.38 crore in the same quarter last year. Revenue of the company increased by 63% YoY to Rs 194.74 crore. However, the topline and bottomline of the company declined by 4% and 58%, respectively, on quarter on quarter basis.
Overall, shares of the company have outperformed the benchmark equity index BSE Sensex amid the ongoing rally on Dalal Street since March 2020. The scrip has jumped 230%, or 3.30 times, to Rs 2,022.80 on June 23 from Rs 612.92 in April last year. On the other hand, the 30-share Sensex pack has gained 85% during the same period.
VSTT commands around 50% market share in the power tiller segment. Its current capacity stands at 60,000 units per annum and FY21 utilisation was 46%. In July 20, the government imposed import restrictions on Chinese tillers which command around 30% share. Analysts expect the company to clock a brisk volume CAGR of 10% in the tiller segment during FY21-FY23.
“Given market leadership in power tillers, sufficient capacity, focused growth in tractors and the debt-free status, VST Tillers looks set for strong growth,” Bank of Baroda Capital Markets said.
Cash flow from operations came at Rs 180 crore for the year ended March 31, 2021 against Rs 82.21 crore last year. Of late, the company has cumulatively taken around 4-5% price hikes so far in calendar 2021, led by commodity costs inflation. It has added 155 dealers in the power tiller segment and 110 dealers in the tractor segment in FY21.
Farm sentiments have started to revive as pandemic resurgence is subsiding with VSTT seeing healthy demand for its product profile. The company sold 1,800 power weeders in FY21 and expects to grow this business exponentially, going ahead. Capex spends for the ongoing financial year is envisaged at Rs 60 crore, primarily meant for product development including the spend with Zeteor on new platforms.
ICICI Securities has a ‘Buy’ rating on VST Tillers and Tractors with a price target of Rs 2475, indicating an upside of over 20% from the current market price. “We remain positive on VST given its market leadership in power tiller segment domestically as well as a penchant to grow in the higher hp tractor space and other farm machinery segment. Going forward, we build in sales and profit CAGR of 14.4% and 8.5%, respectively. Capital efficient business model, healthy cash surplus balance sheet provide a good margin of safety,” the brokerage said.
On the other hand, Bank of Baroda Capital Market sees limited upside in VST Tillers after the recent rally. As a result, it has cut the rating from ‘Buy’ to ‘Hold’ with a March 2022 target price of Rs 2,300.
