VST Tillers trades 18% up on crossing 500,000 power tillers production milestone

The share price of VST Tillers Tractors Ltd jumped 18 percent on Wednesday after the company crossed the production milestone of 500,000 power tillers from its manufacturing plant at Malur in Bengaluru.

“The overall power tiller industry in India is around 60,000 units and it is expected to grow to 100,000 units by 2025. VST is the leader in the segment and holds a market share of over 65 percent in the country,” the company said in an exchange filing.

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The tractor manufacturer recently announced the launch of its premium utility tractors under Zetor brand which it plans to launch in Q1FY24.

“We are on the verge of launching utility tractors with our joint collaboration with Zetor, which should be launched in the first quarter of the coming financial year. With this, we will be entering into the larger horsepower space,” CEO Antony Cherukara said in an interview with CNBC-TV18.

He also mentioned that the company has not seen any growth in the compact tractor space where it is an established player, and is therefore expanding its product line by entering the larger horsepower (HP) tractor space.

“With this, the share of high HP in our tractor volumes is expected to reach 20 percent in FY24 and 30-40 percent in the following year,” said Cherukara during the company’s Q3 FY23 earnings call.

The company is also planning to double its annual research and development (R&D) expenditure from Rs 40-50 crore to Rs 100 crore in the next couple of years to support its growth efforts, including transitioning from a power-tiller-centric company to a farm mechanisation company, as well achieving a revenue of Rs 3,000 crore by FY26.

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In Q3FY23, the company’s operational revenue grew 2.5 percent on-year to Rs 214 crore against Rs 208 crore in Q3FY22. It declined 9 percent on a quarterly basis. Its EBITDA (earnings before interest, taxes and depreciation and amortisation) fell 23 percent on-year at Rs 23 crore, while margins contracted 360 basis points from 14.5 percent in Q3FY22 to 11 percent in Q3FY23. Net profit dropped 8 percent YoY and 15 percent QoQ to Rs 19 crore.

The market capitalisation of the company has jumped over 200 percent in the last three years, however, it has declined 4 percent in the last one year. At 11.52am, the scrip was trading 10 percent higher on the NSE at Rs 2,388, while the benchmark Nifty was trading 0.24 percent, up at 17,148.80 points.