An uptick in demand during Diwali – VST Tillers Tractors

An uptick in demand during Diwali – VST Tillers Tractors

Update on the Indian Equity Market:
On Thursday Nifty closed 1.0% higher at 12,906. Among the sectoral indices, PSU Banks (+1.9%), Metal (+3.9%), and Fin Services (+1.7%) closed higher. None of the sectors closed lower. Eicher Motors (-1.6%), Maruti (-0.7%), and BPCL (-0.7%) closed on a negative note. JSW Steel (+7.0%), Tata Steel (+5.2%), and Grasim (+4.4%) were among the top gainers.

Excerpts from an interview of Mr. Antony Cherukara, MD, VST Tillers with CNBC-TV18 dated 23rd November 2020:

● Better agriculture and the festive season have led to rising demand for tractors and farm equipment.
● Speaking on the outlook, Mr. Cherukara says, the outlook is positive as an uptick in demand is seen.
● There was an uptick in demand during the Diwali festival.
● On tillers, he says, the import slowdown is coming into place, and going forward there will be an effect on demand based on that.
● 15-20% of imports of tillers were from China earlier. The Chinese tillers are cheaper as compared to Indian manufacturers. The quality of Indian tillers is good.
● On tractor sales, he says, the expected growth for tractors in FY21E is expected to be in the range of 12-15%, and a 20%+ growth is expected in tillers.
● There is not much visibility on Q4FY21 as of now.
● Speaking on cash on the books, he says, the cash flow is healthy and the company has generated 70cr + of additional cash flow in H1FY21.
● The relocation of the Benagluru facility to Hosur is on track and it is expected to be done by Q4FY21E. There will savings after this relocation.

Consensus Estimate: (Source: market screener and websites)

● The closing price of VST Tillers Tractors was ₹ 1930 as of 26-November-2020. It traded at 22x/ 20x/ 14x the consensus Earnings per share estimate of ₹ 87.3/98.8/136 for FY21E/ FY22E/ FY23E respectively.
● Consensus average target price for VST Tillers Tractors is ₹ 1,977/- which implies a PE multiple of 15x on FY23E EPS of 136/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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