VSt Tillers and Tractors limited

(Rajeev Jawahar) #61

possibility.". < 20HP and 22HP tractors which VST specializes in, should also see a double digit growth

c) So, roughly according to my calculations, this is a 2x in 3 years kind of bet, with a reasonably high probability:

Rougly, say for FY15 (or middle of FY16),they sellTillers (30-33K) with 1.2L per tiller realizaton…around 400 cr sales

and Tractors, roughly 20-25K (too aggressive?)…with 2.5L per tractor realization…around 600 cr sales

So, 1000 cr sales in FY15 (or middle of FY16), with 9% net margin (conservative), will give us 90 cr profit…on a equity base of 0.86 cr, will give us a 104 EPS. A 10 P/E would give me a 2.5 bagger from here in 2-3 years or less (not considering the dividend yield)

d) Given that it’s an election year and subisidies have been announced by almost all state govts., and central govt. (very broad assumption that I am making, and for which I account below in a note) for the agriculture sector along with a fantastic monsoon, we should be expecting a a very good growth in tillers and tractors this year

e) At around 1000 rupees per share, it is around fairly valued :)) and we can start selling :)) (my optimism of course, knows no bounds)

f) Another kicker being - it is close to 500 cr market cap…once it crosses 500 cr, institutional investors might jump in…as there aren’t too many agri based players with a long track record and a dividend paying history

g) Last but not the least…Q2 2012 had a 6.5 cr profit. Since it’s been a great monsoon, there is little probability of slowdown in sales - and hence, even if we consider the same profit of 18 cr like 1st quarter (historically Q2 has been a good quarter except for the last year), the profit increase % would be very good.

I don’t want to make it more simpler than it is (and all businesses and quarters are not linear and subject to risks), but 18 cr quarterly profit, on an annualized basis is around 72 cr profit (not counting the operational efficiencies and the revised and better product mix due to more tractors). So, we are looking at about 70-80 bucks EPS this year. At 8 P/E, we are looking at a 35-50% appreciation from these levels.

The analysis seems simplistic - and if it is not, why hasn’t the market re-rated it already?

What is the insight that we have, that the market currently doesn’t? I am looking for information around subsidies and which states have given/declared it and which states haven’t? Karnataka had pulled out subsidies last time, have they re-instated it? Gujarat and Maharashtra are the biggest tractor markets for VST Tillers - any information on subsidies in those states?

Disc: Taken a starter position at current levels. Will build or cut the position depending on the information stream that comes through.

VST-Tillers.docx (10 KB)


@govindrajan thanks!!



(Kiran) #64

Thanks all.

As per AGM, 15K tractors by FY15, with say 30K tillers would give us about 725 cr revenue. Translating into roughly 80-85 EPS, depending on the net margins. So, at current prices, even with no PE re-rating (assuming the same 7 P/E to continue), we are looking at a 40% growth in 2 years. 20% growth in 1 year. Not bad at all. But nothing great either.

The Chairman’s speech indicates good performance to continue this year, which bodes well to our estimates.

John Deere tractors are usually used in larger farms, while VST tractors are targeted at smaller farms. I know of no good way to get a good sample size though - since smaller farms are typically (atleast in AP & K’taka) not on the main roads where we pass by. Anyway, the market size is very large, VST is growing off a very small base and the 22HP target is different from a > 30HP target. I wouldn’t worry about too much competition till they hit 10K tractor levels.

Subsidy of course was what had put me off this stock when I had analyzed it back in 2011. The only reason why I think there is a positive fillip now is because of the impending elections and great monsoon. The govt., I think will not let such kind of opportunity to pass.

But then again, except for conjectures on this, we don’t have any raw data. VST gets subsidy related money only in the 4th quarter (thankfully, March is before the elections and no risk of early elections, thanks to Congress announcements). To re-iterate my previous question, do we have any concrete knowledge of announced subsidies in various states and if any cancelled subsidies (like Karnataka) have been reinstated? (the number of yojanas are mind-boggling :slight_smile: )

(Rajeev Jawahar) #65

Hi all,

VST Tillers apart from being a great long term story, excites me in the short run as well. The nature of the Co. is such that it is pretty seasonal, so logically some qtrs are traditionally better than others. Q2 has traditionally been better than Q1, other than last year, which was a one off, as detailed on the Co. website. http://www.vsttillers.com/sites/default/files/share_holder_information2.pdf

If this is correct then based on Q1 of the current year,the full year 2013-14 should see a topline, EBIT &PAT of abt. 680Cr, 120Cr. & 80Cr. I have taken the average rate of growth based on Q1 of the 2 years prior to last year i.e 2010-11 & 2011-12

Taking this logic further, Q2 for the current year should show Sales, EBIT & PAT of about 170Cr., 30Cr. & 20 Cr.

I agree that these figures look somewhat optimistic, and I could be wrong, but I have given the logic behind these numbers. If they are anyway near reality, then we are looking at a rerating of the stock around the Q2 results, given that it is an otherwise Co. with a strong balance sheet n good corporate governance.

Would be happy to know the views of fellow value pickrs!!

(Hitesh Patel) #66

Excellent results from vst tillers.

sales up from 89 cr in q2 fy 13 (remember q2 fy 13 was a sort of aberration) to 152 crores.

Net profits up from 6.57 cr to 18 cr.

half yearly eps of 42… full year likely to be 80 plus because second half is usually better than first half for vst tillers.

What is great is also the balance sheet… no debt… current investments of 82 crores… cash and equivalents 31 crores…

Stock up around 13% today to close at 575… And still looks very very attractive based on valautions…

(Hitesh Patel) #67

hdfc fund seems to be buying into vst tillers… there were higher vols today…

NSE Bulk Deals 03-Dec-2013 VST Tillers HDFC TRUSTEE CO.LTD.A/C. HDFC PRUDENCE FUND Buy 75079 596.00 596.00 BSE Bulk Deals 03-Dec-2013 VST Tillers HDFC MUTUAL FUND Buy 72508 596.00 596.00

(Kunal) #68

Yes Hitesh.

VST Tillers Tractors gains on HDFC MF stake buy

HDFC Mutual Fund bought 147,587 shares at price of Rs 596 per share through bulk deals.

(Sunil) #69

QA coming to end and with election arriving in few months can we expect good subsidy for VST? In that case it may see some jump.

(Sunil) #70

Sorry I mean’t Q4. Work environment effect :stuck_out_tongue:

(Rajeev Jawahar) #71

There was this half an hour programme on VST Tillers on “HSBC Making it big” today at 4.30 pm on CNBC, which was very useful n gave a decent insight into the Co.'s working. For those who missed it, it’s probably available on moneycontrol.

(Hariharan) #72

Hitesh Sir,

At 660 is it still the right time to buy VST for the long run?. Please let know.



(Ashwini Damani) #73

Had sent a mail to the company asking them about the status of new Hosur Facility. Their response is mentioned below :

Dear Sir,____

The production at new tractor plant has not been started. The production capacity is 36000 units p.a. The updated status of the Hosur new Tractor plant with regard to commence of production will be intimated in due course of Time.____


(Hitesh Patel) #74


you can drop the sir…

coming to vst tillers, for me it was an undervaluation bet and now with improving fundamentals it seems a good long term bet… the third quarter results will be much awaited in view of company having announced about its sales problems arising out of cyclonic conditions in one of its major markets orissa…

over the long term of 2-3 years its seems interesting.

regards, hitesh.

(Ashwini Damani) #75

Interview of VST Tillers on CNBC Making it Big


(Dinesh Verma) #76

Hitesh Sir,




** sir…coming **

** orissa…over **


regards, hitesh.

Hi Hitesh,

For the last 3 year results, actually it did not do much. on the contrary 2013 results sales actually came down. But the last 6 months have been good.

What were the reasons according to you that it could not pull up the profit earlier and it could do in the last 6 months.

Apart from the new production to start what other things do you see to hold this for few years.

please help to understand.



(Hitesh Patel) #77


last year they had some supply side issues with some vendors… that led to reduced sales.

the triggers going forward is that the new facility will ramp up its tractor facility and tractors are higher margin products as compared to tillers. Plus they are less exposed to vagaries of subsidies as compared to tillers.

So its a story of increasing sales with improving margins for next couple of years.

(Dinesh Verma) #78

Hi Hitesh,

It seems like again someone bought on friday, 25,000 @ 688 as the delivery volume was very high.


(Pravin Choudhari) #79

Sir, Time.____

__Hi Ashwini

Found this visit note from SPA securities:


Key points from the report.

1). Hosur plant undergoing trial runs, production to start by Feb-14

2). 20% revenue growth target for 2015

3). Maintenance capex worth 5-10 cr expected to be incurred in FY15.

4.Current tiller/trcator ratio of 70:30, company targeting for 45:40 (rest from rice transpllanters)




(Dinesh Verma) #80

Tractor industry outlook