VST Tillers Tractors - Rs.132.00

Established in 1965, VST Tillers and Tractors Ltd. (VST) is the undisputed leader in the Indian tiller market enjoying more than 50% market share. It manufactures power tillers along with low horse power (sub 20 HP) tractors to cater to small farmers. Power tiller is nothing but the two-wheeled version of tractors and is meant for farmers with smaller land holdings and for those who cannot afford expensive tractors. The cost of a tiller is almost 1/3rd of a tractor. Presently, tillers is the main product of the company with 2/3rd revenue coming from it followed by tractors, which contribute around 20%. In addition, VST supplies farm equipments, diesel engines and precision components like crankshafts, connecting rods etc. It is also trades by supplying imported machinery from other countries such as rice transplanters, combine harvesters, garden tillers, reapers, hedge trimmers, bush cutters, hole diggers etc.

VST has three manufacturing facilities at Bangalore, Mysore and Hosur in technical collaboration with the Mitsubishi group of Japan. The products are sold under the brand name - VST Shakti, Mitsubishi-Shakti and Euro Trac and are also exported to countries in South Asia, East Asia, Middle East, Africa, Europe, USA etc. In order to beat the competition and increase its market share in the lower end tillers, VST has started importing Chinese tillers in CKD form, assemble them at its Hosur facility and sell them under a new brand Dragon Power Tiller (14 HP horizontal four stroke single cylinder) through its marketing and distribution network. In collaboration with Mitsubishi, Japan, it is planning to put up a manufacturing plant of diesel engines for power generators and tractors. Besides, the company continues to pursue cost cutting strategies, increasing manufacturing efficiencies, strengthening marketing initiatives and garner greater economies of scale to stay ahead.

In the Union Budget 2007-08, the government has put special thrust on agriculture and hence farm credit target has been raised from Rs.1,75,000 cr. to Rs.2,25,000 cr. with addition of 50 lakh new farmers to the banking system. This augurs well for VST since more than 80% of tractor sales are on credit. It has reported very encouraging results for the December 2006 quarter and may end FY07 with sales of Rs.160 cr. and profit of Rs.11 cr. i.e. EPS of Rs.19 on its equity of Rs.5.76 cr. The management may even declare Rs.4 as dividend. Its sales and net profit can rise to Rs.200 cr. and Rs.12.75 cr. for FY08. Moreover, it also has some surplus property in Bangalore, which may fetch a handsome value to the company, although officially not announced by the company. Hence investors are advised to buy at declines as its share price can appreciate by 50% in 9-12 months.