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

In the recent earnings call for Q1 FY "˜26, management at VST Tillers Tractors provided an optimistic outlook for the company. Key points include:

1. Revenue Growth: The company achieved its highest-ever turnover for Q1 at Rs. 282 crore, representing a robust 48% increase compared to the previous year. They also reported a significant increase in Power Tiller sales, with a 92% growth translating to 11,701 units sold.

2. Sales Performance: The Power Weeder segment saw sales grow by 63% with 2,349 units sold. Although tractor sales in the domestic market grew modestly by 5%, exports increased by approximately 20%, amounting to 312 tractors.

3. Financial Metrics: Operational EBITDA rose to Rs. 37.5 crore with margins at 13.3%, up from 7% a year ago. Profit After Tax (PAT) stood at Rs. 44.6 crore, compared to Rs. 22.8 crore in Q1 of the previous year.

4. Future Guidance: Management anticipates operational EBITDA margins to remain in the range of 11% to 13% going forward. They emphasize a positive outlook driven by good sales trends observed in July, with expectations for solid performance in Q2.

5. Product Launches: The company introduced its FENTM series of tractors, emphasizing fuel efficiency and specialized models aimed at different farming needs. Additionally, four new products in the SFM business were launched, including electric and gas models.

6. Market Projections: Management expressed confidence in reaching the target of Rs. 3,000 crore in revenue by FY 2029-30, indicating a planned product launch pipeline of over 20 new products in the next 24 months.

This comprehensive strategy positions VST Tillers to capitalize on growing demand among small and marginal farmers, particularly considering the rising retail financing in equipment purchases.

1. Question: "For the second quarter just want to get some further granularity on your guidance, we have said the quarter will be good, is it possible to quantify some of the metrics what we expect from the second quarter?"

Answer: "It's extremely difficult to quantify specific numbers. July numbers have been good, and August is looking positive too, although September may taper down as the cropping season changes. Overall, we expect a better performance, but exact figures remain uncertain."

2. Question: "What is really changing regarding geographical expansion for Power Tillers?"

Answer: "There is tremendous potential in small farm machines. Retail finance for Power Tillers has grown significantly from 0% to nearly 10%. With new banks and NBFCs entering the finance space, I expect growth to continue, aiming for 30%-40% retail finance in the next two years."

3. Question: "On the export side, is this largely Europe that has slowed down for us?"

Answer: "Yes, it's primarily Europe and the U.S. We're facing logistical issues that delay inventory delivery, impacting capital rotation for distributors. We're setting up an operations base in Europe to mitigate these challenges."

4. Question: "You had a vision for around Rs. 3,000 crore in one year or two years. Can you comment on that?"

Answer: "We are committed to achieving that vision, although it has been delayed. We now aim for the 2029-2030 fiscal year, with a clear roadmap, despite uncertainties in the market."

5. Question: "Could you elaborate on the new launch of the FENTM series in terms of differentiation?"

Answer: "The FENTM series is designed for maximum performance, fuel efficiency, and compactness. It's tailored for specific applications like vineyards and sugarcane. While there are compact tractors on the market, we believe this series redefines benchmarks in performance and usability."

6. Question: "What is the market size for weeders and how is your share?"

Answer: "The market size for weeders is estimated at 250,000 to 300,000 units. We started two years ago and are growing rapidly, aiming to capture more market share as we expand our distribution and improve product awareness."

7. Question: "What are the main challenges affecting tractor export growth?"

Answer: "Logistics and capital rotation for distributors are significant challenges. Demand remains stable in western Europe, and we are focused on improving our logistics setup to increase efficiency and volume."

8. Question: "What kind of sales do you expect for this year from Zetor?"

Answer: "While we haven't launched the revamped Zetor product yet, we expect to ramp up sales after its launch during Diwali. Overall, we will see relative growth compared to earlier numbers, but it will still be modest in the industry context."

9. Question: "How do we view the expansion of the reaper and weeder segments?"

Answer: "We've shown growth of 60%-70% in the first quarter and expect this trend to continue due to increased market awareness and product availability. The potential is significant due to the unorganized nature of the segment."

10. Question: "How are global geopolitical and logistic challenges impacting your export supply chain?"

Answer: "Logistic issues, rather than geopolitical concerns, are the main impactors, elongating transit times and affecting distributor capital. Demand is stable, but we plan to foster better capital rotation and set up a local operational base in Europe."