VSTTILLERS - V.S.T.Tillers Tractors Ltd. Share Price

Management provided a cautiously optimistic outlook for FY27, indicating that while demand in April and May has been good, uncertainties due to inflation and monsoon predictions could impact performance. The Managing Director, Antony Cherukara, noted that April historically is a low month, yet the company grew in both tractors and tillers. Looking forward, the predicted monsoon is at 92% of long-period average, but its spatial distribution remains uncertain.

Key points highlighted by management for FY27 include:

1. Growth Target: Although management previously aimed for a continuous CAGR of 23%-26% until FY30, they have refrained from giving a specific growth percentage for FY27 due to market uncertainties. They expressed optimism for growth but acknowledged the difficulty in projecting exact numbers.

2. EBITDA Margins: The company aims to maintain EBITDA margins between 12%-14%, with a focus on operational efficiency leading towards an average of 13%.

3. Diversified Markets: There is a strong emphasis on expanding the retail finance segment, aiming to increase it from 10% to 20% in FY27. Management underscored their efforts to strengthen operations for small and marginal farmers through "Project Chatrapati."

4. New Product Launches: The company plans to continue exploring the electric tractor market and has already seen success with electric weeders, which are set for a broader launch.

5. Supply Chain Management: Efforts to optimize the supply chain have resulted in reduced inventory and improved operational efficiencies, which are expected to sustain profitability under inflationary pressures.

Overall, while management has set high aspirations for growth, they remain cognizant of external factors that could influence performance in the coming year.

Q: Can you briefly touch upon what is the outlook for '27 as of now?

A: It's challenging to provide a definitive outlook due to various uncertainties. However, demand has been good for April and May. Despite inflation from rising fuel and commodity prices, we believe we are managing costs effectively. The monsoon prediction is at 92% LPA, and if rainfall distribution is favorable, we expect decent volumes. Overall, it's a volatile situation, making it hard to predict outcomes in the next few months.

Q: How has the initial response to the FENTM tractor series been, and how does it improve VST's competitive positioning?

A: The tractor industry has seen growth, and we're outperforming the compact tractor segment, thanks to the FENTM launch. While most growth is in higher horsepower models, our new products have led to month-on-month volume increases, and we anticipate strong growth in this financial year.

Q: Please elaborate on the investment in Zimeno Inc. and the outlook for electric tractors.

A: We invested in Zimeno for technology and expertise in electric tractor drivetrains. Despite some setbacks due to tariff changes, we are ready to launch electric tractors. Initially, we are focusing on electric weeders and tillers, which we plan to launch across India in early Q2, ensuring they cater well to small and marginal farmers.

Q: Can you provide guidance for FY27, considering industry uncertainty?

A: In FY26, we achieved 25% growth. While I'd like to aim for similar growth, predicting specific rates is tough due to uncertainties like weather patterns. We're focusing on managing finance and retail, aiming for 20% retail financing this year. Our strategies help, but we are monitoring growth monthly and quarterly.

Q: Do you believe you can maintain your EBITDA margins this year?

A: We have consistently targeted EBITDA margins between 12% and 14%. Given our operational efficiencies and improvements, we are moving towards 13% and above, so we are optimistic about maintaining those margins in the coming year.

Q: What parts of the business do you see having potential growth?

A: We see potential growth primarily in small farm machinery and the tractor segment, especially for small and marginal farmers. Our operational strategies are positioned to improve growth in both segments this year.

Q: How are you addressing rising commodity prices? Will you be able to pass on costs?

A: We've already implemented some price increases. While we monitor commodity inflation closely, and operational efficiencies help, passing on full costs may not be possible. We will continue assessing our pricing strategy as the situation evolves.

Q: What are your volume targets for the ZETOR brand this year?

A: We aim to reach 1,000 units for the ZETOR brand this year. We are confident in the brand's potential and have several variants planned that will help grow its reach and volume.

Q: When do you expect to see real growth from your investments?

A: We plan to leverage our investments in technology and global market expansion actively. We are targeting a return on our investments by exploring growth opportunities in adjacent markets and enhancing our existing product lines over the next few years.