ICICI Direct's research report on VST Tillers Tractors
The government via its notification on July 15, 2020 has placed power tiller in a restricted import product category from a free product category placed earlier. The move is seen largely supporting domestic power tiller manufacturing vs. imports (~20-25% of industry) given surplus capacity domestically. It is positive for all power tiller players manufacturing in India with VST Tillers & Tractors (VST), in particular, a key beneficiary given its industry leading market share at ~46% (FY20). With certainty of market share gains for VST coupled with robust farm sentiments, we revise upward our estimates as well as valuation multiples to upgrade VST to BUY.
Outlook
VST possesses a robust balance sheet, which is debt free and cash rich in nature and clocks healthy positive CFOs. With volume uptick in the offering as well as recovery of margin profile, earnings are expected to witness a smart recovery, going forward. Consequently, we upgrade VST from HOLD to BUY rating and value the stock at Rs 1700 i.e. 21x FY22E EPS of Rs 81.2.
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