20140107 VST Tillers Tractors Limited VisitNote

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VST Tillers & Tractors Ltd.Sensex: 20851 CMP: INR 710

Tractors

20% revenue growth target for FY15

VST is targeting 20% revenue growth in FY15 led by higher tractor

sales (as a result of start of the new tractor capacity) & increasing

farm mechanisation. The management is of the view that

significantly low tractor & tiller penetration among the low land-

holding farmers will help companies like VST, which operate in

the sub-20 HP tractor category, to grow at a higher rate in the

medium term. The company is planning to launch a new tractor in

the 25-30 HP category, which will also aid growth.

Capex plans

The company has incurred capex of INR 700 mn to set up a tractor

manufacturing plant with a capacity of 36000 units. The plant is

ready & is currently under trial run. The management plans to

start commercial production from February 2014. The company

has no other plans to enhance capacity & only maintainence capex

worth INR 50-100 mn is expected to be incurred in FY15.

Robust outlook on Agri-Tractor industry

Tractor industry is expected to register decent growth as

government's thrust on improving agricultural productivity,

shortage of man power & higher efficiency while using mechanized

input in farming sector is creating oppurtunities for tillers & agri-

tractors manufacturers. Even if monsoon is sub-normal next year,

abundant availability of water in reservoirs will ensure decent

crop production growth. VST manufactures sub-20 HP category

January 07, 2014 VISIT NOTE

tractors, on which subsidy is provided to farmers which decreas

the effective cost of ownership, thereby helping the buyer to quic

recover their investment amount, as compared to higher H

tractors.

Other Key Highlights

(1) Currently Tillers:Tractors ratio stands at ~70:30. VST is targeti

to take the ratio to 45:40 (& the rest being contributed by R

transplanters) over the long term which is expected to arevenue growth as realization on Tractors is 2x of Tillers.

(2) The company had launched a 22HP tractor last year. To furth

strengthen its product portfolio, the company is developin

25-30 HP tractor which it plans to launch in FY15.

Outlook & Valuation

We expect tractor industry to grow at a CAGR of 10.9% betwe

FY13-15E. The tractor capacity addition at VST comes up at

opportune time when the agri-tractor industry is expected to

well on the back of good monsoon, government's thrust

improving agricultural productivity, shortage of man power

higher efficiency while using mechanized input in farming secto

The timely launch of subsidy schemes by state & cent

governments is a critical factor & any delay in initiating t

subsidy program may impact the company's financials. At CMP

INR 710, the company is trading at a P/E of 5.86x its TTM earnin

Shareholding (%) Sep-13

Promoters 53.85

FIIs 3.33

DIIs 5.43

Others 37.39

Relative Price Performance

Key Data

BSE Code 531266

NSE Code VSTTILLERS

Bloomberg Code VSTT IN

Reuters Code VST.BO

Shares Outstanding (mn) 8.64

Face Value 10

Mcap (INR bn) 6.04

52 Week H/L 740.00/330.00

2W Avg. Qty.NSE 16813

Free Float (INR Bn) 2.79

Beta 0.6

(INR mn) FY10 FY11 FY12 FY1

Net Sales 3445 4273 5306 481

Growth (%) 25.68% 24.01% 24.20% -9.23%

EBIDTAM (%) 18.14 16.44 13.76 15.0

Adj. PAT 424 462 499 48

Growth (%) 46.01% 9.01% 7.88% -2.61%

Adj. EPS (INR) 47.74 52 56.33 54.6

P/E (x) 6.38 8.5 8.06 6.4

EV/EBIDTA 3.96 4.86 4.99 3.6

Net Debt/Equity -0.03 -0.13 -0.02 -0.1

RoACE (%) 53.37 47.72 38.46 29.

RoAE (%) 38.9 31.9 27.16 21.6

We met the management of VST Tillers & Tractors to understand their business model & get a sense of their strateg

going ahead. VST is the market leader in the Indian power tiller industry with a strong presence in the sub-20 H

tractor & tiller segment. The management is positive on the outlook of Tractor industry & is targeting 20% salegrowth for the company in FY15. The new tractor plant is undergoing trial run & is expected to commence producti

by February 2014. Given below are the key takeaways from the visit-

Prashant [email protected]

Ph. No. 91 33 4011 4800 (Ext. 833)

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VST TTL Sensex


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Financials

Income statement

Year End March (INR mn) FY10 FY11 FY12 FY13

Net Sales 3445 4273 5306 4817

% Growth 25.68% 24.01% 24.20% -9.23%

Cost of Goods Sold 2257 2871 3785 3295

Employee Cost 200 254 284 281

Other Optg. Exps. 364 446 507 517

Total Optg. Exps. 2820 3570 4576 4094

EBIDTA (excl OI) 625 703 730 723

% Growth 45.69% 12.40% 3.96% -1.03%

EBITDA Margin % 18.14% 16.44% 13.76% 15.01%

Dep./Amortization 26 23 32 34

EBIT 599 680 698 689

EBIT Margin % 17.39% 15.91% 13.16% 14.31%

Interest Expense 10 10 11 14

Other Income 29 40 46 21

EBT 618 710 734 696

Tax Expenses 195 249 234 211

PAT 423 462 499 486

Adjustment to PAT -1 0 1 0

APAT 424 462 499 486

% Growth 46.01% 9.01% 7.88% -2.61%

APAT Margin % 12.31% 10.82% 9.40% 10.08%

Balance Sheet


Share Capital 86 86 86 8

Reserves and Surplus 1182 1554 1963 235

Total Networth 1269 1640 2049 244

Minority Interest

Secured 23 0 0

Unsecured 85 0 160

Total Debt 108 0 160

Deferred Tax Liability 16 31 37 4

Other Liabilities 0 15 21 20

Sources of Funds 1386 1680 2260 268

Net Block 504 528 564 76

CWIP 17 23 62 14Investments 44 368 244 4

Current Assets 1365 1536 2302 235

Current Liabilities 547 795 955 68

Net Current Assets 819 741 1348 167

Deferred Tax Assets 3 4 5 1

Other Assets 0 17 38 4

Application of Funds 1386 1680 2260 268

Cash Flow


EBT 618 710 734 69

Less: Other Income/Exceptionals (29) (40) (46) (2

Add:Depreciation 26 23 33 3

Add: Interest paid 10 10 11 1

Direct taxes paid (216) (234) (229) (21

Change in Working Capital (270) 136 (609) (20

Cash Flow from operations (a) 197 686 (14) 34

Change in Fixed Assets (102) (45) (61) (23

Change in CWIP (14) (6) (39) (8

Change in Investments 7 (325) 124 20

Cash Flow from Investing (b) (109) (376) 24 (11

Change in Equity 0 0 0

Debt Raised/(Repaid) 37 (108) 160 (16

Dividend paid (65) (78) (78) (7

Interest paid (10) (10) (11) (1

Cash Flow from Financing (c) (38) (196) 71 (25

Net Change in Cash (a+b+c) 50 114 82 (1

Opening Cash 187 150 208 20

Closing Cash 150 208 206 32

Key Ratios

Year End March FY10 FY11 FY12 FY13

Per Share Data (INR)

Reported EPS 49 53.46 57.79 56.22

Adj. EPS 49 53.46 57.79 56.22

Growth (%) 46.44% 9.10% 8.10% -2.72%

CEPS 51.99 56.09 61.51 60.11

DPS 7.5 9 9 9

BVPS 146.08 189.07 236.4 282.09

Return Ratios (%)

RoACE 53.37 47.72 38.46 29.2

RoANW 38.9 31.9 27.16 21.68

RoIC 36.5 31.03 26.18 20.37

Liquidity Ratios

Net Debt/Equity (0.03) (0.13) (0.02) (0.13)

Interest Coverage Ratio 64.71 73.49 68.3 50.73

Current Ratio 2.12 2.06 1.95 2.5

Quick Ratio 1.68 1.24 1.72 2.24

Efficiency Ratios

Asset Turnover Ratio 3 3 3 2

Inventory Days 47 47 45 63

Debtor Days 71 53 85 74

Creditor Days 45 31 28 15

Valuation Ratios

P/E (x) 6.22 8.27 7.86 6.3

P/BV (x) 2.09 2.34 1.92 1.26

P/CEPS (x) 5.86 7.88 7.38 5.89

Dividend Yield (%) 2.46 2.04 1.98 2.54

EV/Net Sales (x) 0.75 0.85 0.73 0.57

EV/EBIDTA (x) 3.96 4.86 4.99 3.67

Tractors


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Tractors

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20140107 VST Tillers Tractors Limited VisitNote