Buy VST Tillers Tractors Ltd For Target Rs.6,048 By Sushil Finance
Highlights from the Quarter (Q1 FY26)
Consolidated sales were at Rs.283 cr, recording a strong 48% yoy growth, with 92% yoy volume growth in the tillers and 63% yoy volume growth in the weeders. Favorable monsoon conditions and improved retail financing has led to the improvement in the demand for tillers. Retail financing has increased from 0% to 10% in the last 2 years, with many NBFC and nationalized banks started financing. VST indicated that July month have reported good sales growth, which should continue for August month as well, with thrust on geographical and product expansion in the future.
On the domestic tractors front, it reported flat numbers for Q1FY26 and 20% dip on the exports. We expect a pick up in the growth, as the company has launched new ‘FENTM’ series tractor (18-29 HP), where in the torque and fuel efficiency is higher as compared to the previous version of tractors. Apart from this, VST will be relaunching high HP tractor, Zetor, with modifications by Diwali this year and expect good volumes in this fiscal. VST plans to launch 20 new products in the next couple of years including the electric version of tillers and the tractors. For European market, demand for the VST products remains stable, however it is taking longer time to reach Europe and therefore it is setting a base by the fiscal end to address this issue.
OUTLOOK AND VALUATION
With a strong presence in Indian power tiller market segment, VST plans to further strengthen its presence through the launch of innovative products in this segment. Its strategy to expand geographically with high horsepower tractors should yield healthy margins. Apart from this, the net debt-free company has been reporting stable return ratios, strong cash generation & has been paying dividends consistently for years. Going forward, we expect the company to deliver an EPS of Rs.151 in FY27; assigning a target multiple of 40x, we arrive at a target price of Rs.6,048 showcasing an upside potential of 14% from current levels with an investment horizon of 18-24 months.
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