VST Tillers rallies 18% in 5 days on strong power tillers sales in August

Analysts remain bullish on VST given the sweet spot of robust demand prospects, import restrictions in power tiller segment and steady improvement in margin profile

Shares of VST Tillers Tractors hit a fresh 52-week high of Rs 1,925, up 6 per cent on the BSE on Monday, surging 18 per cent in the past five days after the company reported a strong power tillers sales in the month of August.

The company sold 2,638 power tillers in August 2020 as against 1,437 in August 2019, registering 83.57 per cent year-on-year (YoY) growth. It had sold 897 tractors during last month, as compared to 813 in the corresponding month of the previous year.

The company’s total sales (power tillers and tractors) were up 57 per cent YoY at 3,535 units in August 2020, as against 813 units in the same month last year.

Thus far in the financial year 2020-21 (April 2020 to August 2020), the company has sold 10,864 power tillers as against 9,341 during the same period previous fiscal. The company is one of the largest manufacturers of power tillers in India with a market share of around 46 per cent in FY2019-20.

"VST expects tractor sales volume to grow around 10-15 per cent in FY21E with power tiller sales volume growth guidance at 15-20 per cent in FY21E. Noticeably, more and more farmers are buying power tiller on cash basis and not withholding purchase for want of state subsidies which is a big positive surprise," analysts at ICICI Securities said in Q1 results update.

VST is in final stages of negotiation for tie-ups in the contract manufacturing space for power tillers given the import restrictions (lower price points; difference package altogether); VST market share in power tiller segment is up 400 bps to 51 per cent while the same in compact tractor segment, it said.

The brokerage firm reiterated its bullish stance on VST given the sweet spot of robust demand prospects, import restrictions in power tiller segment and steady improvement in margin profile. VST also possesses a healthy balance sheet (cash rich) with history of consistent positive CFO generation.

At 10:27 am, the stock was trading 5 per cent higher at Rs 1,900 on the BSE, as against 0.20 per cent decline in the S&P BSE Sensex. A combined around 33,000 equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.