Management Meet Note
April 30, 2015
VST Tillers Tractors (VSTTIL)
Rating Matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
Unrated
NA
NA
NA
Key Financials
(| Crore)
Net Sales
EBITDA
Net Profit
EPS (|)
FY11
427.3
70.3
46.2
53.5
FY12
530.6
73.0
49.9
57.8
FY13
481.7
72.3
48.6
56.2
FY14
624.2
119.0
82.9
96.0
FY11
26.5
15.6
7.5
28.3
41.6
FY12
24.5
15.0
6.0
24.4
31.7
FY13
25.2
15.2
5.0
19.9
28.3
FY14
14.7
9.2
3.9
26.6
36.9
Valuation Summary
(x)
P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)
Stock Data
Particular
Market Capitalization
Total Debt (FY14)
Cash (FY14)
EV
52 week H/L (|)
Equity capital
Face value
FII Holding (%)
DII Holding (%)
Amount
| 1223 crore
| 0 crore
| 125 crore
| 1098 crore
1995 / 980
| 8.6 crore
| 10
7.6
9.1
Price Performance
Return (%)
VST Tiller Tractors Ltd
Mahindra & Mahindra
Escorts
HMT
1M
13.5
(1.2)
(2.0)
6.5
3M
(6.4)
(9.6)
(7.6)
(36.7)
6M
6.8
(9.6)
(27.4)
6.3
12M
37.7
10.0
(1.4)
37.7
Price Movement
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
2,500
2,000
1,500
1,000
500
0
Apr-12 Nov-12 Jun-13 Jan-14 Sep-14 Apr-15
Price (R.H.S)
| 1416
Quality play in farm mechanisation...
Nifty (L.H.S)
Research Analysts
Chirag J Shah
shah.chirag@icicisecurities.com
Shashank Kanodia
shashank.kanodia@icicisecurities.com
We recently met R Thiyagarajan, Executive Vice President & Chief
Financial Officer of VST Tillers Tractors (VST), to get an insight into the
domestic farm mechanisation industry and VST’s role in the entire
agriculture value chain. VST is a farm equipment manufacturer wherein it
manufactures power tillers and tractors at its facilities in Bangalore &
Hosur (Tamil Nadu), respectively. The company has a current capacity to
manufacture 60,000 units of power tillers and 36,000 units of tractors.
VST is a leading power tiller player domestically with total power tiller
sales for FY14 coming in at 27252 units with corresponding market share
of 48.7%. On the tractors front, the company is a strong player in the
small agricultural tractors and manufactures tractors with <30 hp. VST’s
topline & PAT have grown at a CAGR of 16.0% & 18.3%, respectively, in
FY10-14. With the central government’s focus on increasing farm
mechanisation domestically to increase crop yields, VST is on a strong
footing with increasing sales and profitability, going forward.
Power tiller segment - subsidy driven, normal growth trajectory to prevail
The domestic power tiller industry is subsidy driven and dependent on
collective planning and execution by state governments. The central
government has provided ample funds for increasing the usage of power
tillers in India but the same gets limited by the execution capacity of state
governments. Average subsidy received by farmer for a power tiller is in
the range of | 40,000 - 60,000/ unit, which costs ~| 1.2-1.4 lakh, implying
a subsidy support of ~30-40%. We believe the tiller division will continue
to provide steady cushion to growth profile as VST’s key prerogative is to
maintain its market share in the range of 45-48%.
Tractor segment to be main growth driver, going forward
VST in the recent past (FY14) has shifted its tractor manufacturing facility
out of the existing plant in Whitefield, Bangalore to Hosur (Tamil Nadu)
with an enhanced capacity to manufacturer 36,000 tractors annually (on a
two daily shift basis). The management has put in place a new marketing
team with a revived focus on augmenting penetration of its product in
different geographies in FY16E, viz. Bihar and South India. Therefore, we
believe that on the back of enhanced capacity and renewed focus on
tractor business, this segment will be the main volume growth driver.
FY15E subdued year, robust prospects, quality play!!!
FY15E will be a subdued year for VST as volumes have de-grown 16%
YoY in 9MFY15 (total sales at 21704 units vs. 25721 units in 9MFY14). It
was so primarily on the back of muted cropping seasons in the recent
past, which affected the purchasing power of Indian farmer and delay in
executing the subsidy scheme by various state governments. With capex
cycle behind it, renewed management focus and good presence among
the farming community, VST is a quality play and is on a strong footing.
Exhibit 1: Financial Performance
(| Crore)
Net Sales (| crore)
EBITDA (| crore)
Net Profit (| crore)
EPS (|)
P/E (x)
Price / Book (x)
EV/EBITDA (x)
RoCE (%)
RoE (%)
FY10
344.5
62.5
42.3
49.0
28.9
9.7
17.6
43.7
33.5
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
FY11
427.3
70.3
46.2
53.5
26.5
7.5
15.6
41.6
28.3
FY12
530.6
73.0
49.9
57.8
24.5
6.0
15.0
31.7
24.4
FY13
481.7
72.3
48.6
56.2
25.2
5.0
15.2
28.3
19.9
FY14
624.2
119.0
82.9
96.0
14.7
3.9
9.2
36.9
26.6
9MFY15
410.7
74.6
50.4
58.4
NA
NA
NA
NA
NA
Key financials
Revenues at VST have grown at 16.0% CAGR in FY10-14 to | 624 crore in
FY14 (| 345 crore in FY10) primarily on the back of increased focus of the
central government on an increase in farm mechanisation domestically.
Exhibit 2: Revenue trend; grows at CAGR of 16.0% in FY10-14
700
600
531
500
| crore
9MFY14:
462 crore
624
482
427
411
345
400
300
200
100
-
FY10
FY11
FY12
FY13
FY14
9MFY15
Source: Company, ICICIdirect.com Research
As of FY14, power tillers are the main revenue contributor for VST (share
at ~55%) with other contributors being tractors (~30%), rice
transplanters (~2%), spare parts and others.
Exhibit 3: Revenue bifurcation (FY14)
others, | 31 crore,
5%
Spares, | 42 crore,
7%
It should be noted that VST only manufacturers power tillers
and tractors. Rice transplanters are something that it does not
manufacturer but trades. The company imports the same from
various vendors based out of China and Japan and sells the
same in India
Rice Transplanter, |
13 crore, 2%
Power Tiller, | 342
crore, 55%
Tractor, | 194 crore,
31%
Source: Company, ICICIdirect.com Research
130000
125661
8000
7000
100000
FY10
FY11
FY12
Sales Volume
FY13
FY14
9MFY15
Realization
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
221309
7452
240000
230000
5087
215806
234498
6233
3000
1000
0
7038
4000
2000
250000
247634
5000
4735
|/unit
16617
27252
21231
110000
260000
6000
number of units
120000
115099
26154
10000
23449
113834
111181
19068
number of units
122764
20000
270000
260682
3758
30000
Exhibit 5: Tractor sales volume & realisation trend
220000
210000
0
200000
FY10
FY11
FY12
Sales Volume
FY13
FY14
9MFY15
Realization
Source: Company, ICICIdirect.com Research
Page 2
|/unit
Exhibit 4: Power tillers sales volume & realisation trend
Power tillers sales volume have grown at a CAGR of 9.3% in FY10-14 to
27252 units (FY14) while realisation has grown at a CAGR of 3.1% to
| 125661/unit (FY14). On the tractors front, sales volume have grown at a
CAGR of 18.7% in FY10-14 to 7452 units (FY14) while realisations have
grown at a CAGR of 4.8% in FY10-14 to | 260682/unit (FY14).
Exhibit 6: Market share in power tiller segment domestically
50000
FY12
56000
44
42
27252
FY11
47000
FY10
43.6
21231
FY09
60000
FY08
55100
FY07
42.4
42.6
26154
0
38794
19068
10000
35294
16691
20000
26135
12174
30000
48
46
45.2
23449
40000
48.7
47.3
46.6
24791
10501
number of units
VST has always maintained its market leadership in the power
tiller segment domestically with market share in the range of
42%-48%. The other major players are Kamco (~25%) &
Chinese companies (~25%-30%)
50
49.2
%
60000
40
38
Total Industry Sales
VST Sales
FY13
FY14
Market Share
Source: Company, ICICIdirect.com Research
Exhibit 7: EBITDA & EBITDA margins trend
Exhibit 8: RoCE & RoE trend
25
140
18.1
16.4
13.8
18.2
15.0
20
70
20
60
50
%
119
75
10
72
73
70
60
40
80
15
80
63
| crore
100
19.1
%
120
20
FY10
FY11
FY12
EBITDA (| crore)
FY13
FY14
54.1
43.7
44.0
41.6
33.5
28.3
36.9
36.9
28.3
31.7
24.4
10
-
-
67.8
40
30
5
69.6
26.6
19.9
-
9MFY15
FY10
EBITDA Margin (%)
FY11
FY12
RoCE (%)
FY13
RoE (%)
FY14
RoIC (%)
Source: Company, ICICIdirect.com Research
Source: Company, ICICIdirect.com Research
Exhibit 9: PAT trend; grows at CAGR of 18.3% in FY10-14
90
83
80
9MFY14:
58 crore
70
| crore
60
50
42
46
50
49
FY12
FY13
50
40
30
20
10
FY10
FY11
FY14
9MFY15
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 3
Exhibit 10: Product Profile
Power Tillers
It is a versatile machine which carries out all the function of tractor except that the operator has to walk behind the machine. Ideally suited for small farmers with popular usage are
wet puddling, dry land cultivation, ridging, water pumping and spraying
Mitsubishi Shakti VWH 120 Power Tiller (Power 9 hp)
VST Shakti 130 DI Power Tiller (13 hp)
Dragon Shakti 150 DI Power Tiller (15 hp)
Tractors
The state of art technology of Mitsubishi, very low weight and in built rotary find exclusive application in wet puddling, inter cultivation, spraying for all crops and horticulture
requiring less than 5 feet of row width planting.
VST Mitsubishi Shakti VT 224 -1D (22 hp)
Mitsubishi Shakti MT 180D Tractor (18.5 hp)
VST Mitsubishi Shakti VT 224 - 1D AJAI - 4WB (22 hp)
Other farm equipments which are not manufactured but traded upon are: Rice Transplanter & Power Reaper
VST is the pioneer in introduction and leader in mechanized rice transplanter. VST deals with both 8 row ridding and 6 row walk behind rice transplanter. VST, Power Reapers are
mechanised units powered by a light weight diesel engine which assist in harvesting rice, wheat, barley etc with rotating blades.
VST Yanji Shakti 8 Row Paddy Transplanter
VST Shakti VS-4PR(n) Power Reaper
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
Page 4
RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
Pankaj Pandey
Head – Research
pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No. 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com
ICICI Securities Ltd | Retail Equity Research
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Disclaimer
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