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

In the earnings call held on May 14, 2025, VST Tillers Tractors Limited management provided an optimistic outlook for FY 2026. The Managing Director, Mr. V. T. Ravindra, highlighted the forecast of a normal monsoon, which is expected to bolster demand, particularly for small farm machinery during the Kharif season. Key forward-looking points include:

1. Growth Projections: Management anticipates a quarter-on-quarter growth of 20-30% for Q1 FY 2026. The positive trend observed in sales throughout April is expected to continue into May.

2. Operational EBITDA: The operational EBITDA is projected to stay within the historical range of 11% to 13% for FY 2026.

3. Market Positioning: While overall guidance remains upbeat, the company expects to maintain growth in small farm machinery and the tractor market, albeit at a slower rate due to its limited presence in higher horsepower segments.

4. Product Pipeline: There will be numerous product launches throughout the year, including upgrades to existing tractor models and new offerings in the small farm machine category, such as electric-powered tillers and weeders.

5. Distribution Expansion: The company plans to enhance distribution capability as it has appointed new distributors, leading to a 56% increase in distribution capacity.

6. International Market Challenges: Ongoing geopolitical issues and logistic challenges are expected to affect inventory rotation and dispatch times, especially in European markets.

Overall, management is focusing on quarter-wise guidance due to the fluctuating variables impacting results, as demonstrated by recent changes in the SPARSH payment mechanism affecting cash flow.

1. Question: "How is the Northern market performing for tillers, and what is the growth rate in that region?"

Answer: We are seeing tremendous growth in the Northern market, particularly for power tillers. We sold around 900 power tillers in FY '25, up from just 200 in FY '24. This gives us a lot of encouragement, and we anticipate continuing this positive trend. Awareness and accessibility are key, and we're actively demonstrating our machines and enhancing financing options.

2. Question: "What is the impact of product mix on our margins, and why did we see a decline?"

Answer: The decline in gross margin is due to a change in our product mix rather than commodity prices. While we benefited from decreased raw material costs, higher sales in regions with lower pricing impacted our contribution margins. Sales in areas like Assam and Orissa were higher, and their pricing dynamics affected our overall margins.

3. Question: "What is the current status of our Zetor brand in terms of sales and market response?"

Answer: The Zetor brand has received a positive response in FY '25, particularly as we expanded into various markets. We're addressing customer feedback and will launch upgrades in H2. We aim to sell around 1,500 units in the higher HP category, maintaining the same expectations from earlier discussions.

4. Question: "What is the state of the SPARSH scheme and its effect on volumes?"

Answer: The SPARSH scheme is a government initiative that has started to stabilize in several states like Tamil Nadu and Karnataka. However, it's still uncertain in the Northeast. This affected our volumes during January and February but is expected to normalize moving forward. Most critical states have now settled down.

5. Question: "Can you provide an update on the potential inorganic opportunities and market expansion like in Bangladesh?"

Answer: Currently, we are exploring inorganic opportunities but have nothing concrete to announce. The political climate in Bangladesh has affected our market entry, where the power tiller market is about 70,000 units annually, predominantly controlled by Chinese products. We're hopeful for progress this year as political stability improves.

6. Question: "What capacities do we have across different segments currently?"

Answer: For tractors, we can produce about 36,000 to 40,000 units annually with one shift. In power tillers, our capacity is around 60,000 to 70,000 units; with an additional shift, we could reach 100,000. For power weeders, we currently can manufacture about 10,000 units, with plans to expand as demand increases.

7. Question: "What is your growth outlook for the full year, considering you are moving to a quarterly guidance model?"

Answer: We believe that 15% to 20% growth is certainly possible for the full year. However, we will focus on quarterly growth to manage the various variables impacting our business effectively. We are at an inflection point and aim to deliver consistent quarterly results.

These responses capture the essence of the questions and respective answers while retaining important numbers and guidance provided in the transcript.