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Accumulate VSTTillers in small lots for superb long-term gains

NewsAccumulate VSTTillers in small lots for superb long-term gains

VST Tillers Tractors Ltd. was established in the year 1967 by V.S. Thiruvengadaswamy Mudaliar with humble beginnings under the VST and Sons banner in the year 1911. The VST group built its reputation through retailing of petroleum products and distribution of Automobiles in Karnataka and Tamil Nadu. VST Tillers Tractors Ltd. was promoted by VST Motors as a joint venture with Mitsubishi Heavy Industries Ltd, Japan and is now the largest manufacturer of Power Tillers in the country. At present, the VST family holds 51% of the equity in VST Tillers Tractors Ltd. The company has recorded consistent growth and has given excellent returns to its shareholders. Tractors are also being marketed under the “FIELDTRAC” brand in various international markets of the European Union. The company has state of the art manufacturing facilities at Malur and Hosur near Bangalore in India and at Mysore for the precision components segment. VST SHAKTI is India’s No 1 brand in Power Tiller which was introduced over five decades ago. VST had pioneered the compact four wheel drive tractors under the brand name “VST Mitsubishi” but has now expanded its presence under the brand “VST SHAKTI” with a diverse range of compact agricultural Tractors. VST Tillers Tractors is currently the leading farm mechanisation player domestically with a dominant market share in the power tiller segment of more than 50%. The farm equipment maker posted a massive 81% year on year growth in profit at Rs 40 crore for the March quarter on the back of strong operating and top line numbers. Revenue from operations grew by 47% to Rs 322 crore compared to Rs 218 crore in the same period of the previous year .The company has done a volume of 12813 power tiller sales during Q4FY23 as against 9282 in the same quarter of last year. Similarly, the company sold 1963 tractors for the fourth quarter of 2023 as against 1575 for the corresponding quarter of the last fiscal. There has been a positive impact on the bottom line with the cooling down in material costs along with acceleration in the small farm mechanisation business with increasing sales in the power tiller segment. VST Tillers is bullish over the next three years on achieving the vision of Rs 3000 crore revenue by 2026. While the company has grown at the rate of 20% CAGR over the last three years, it is planning to accelerate its growth at over 30% year on year to achieve the expected exponential growth in top line. VST Tillers is well positioned to maintain its dominant market share in the power tiller market. The company is favourably positioned to reach operational targets on the back of newer product launches and strengthening of its distribution network. With increasing demand for small farm machines and energy efficient and environment friendly equipments in the agriculture sector, products like electric tractors are gaining prominence. Hence, investments and strong technological alliances with Pubert of France and Zetor of Czech Republic and Zimeno of USA will transform the company over the years. Analysts and fund managers are bullish on VST Tillers as sales for May 2023 are expected to be high and Q1FY24 financial results are going to be excellent. The stock currently quoting at Rs 2,700 is quite high from a retail investor perspective, but it can be accumulated in smaller lots for superb long-term gains for portfolio investors.

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