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VST Tillers hits 3-year low; tanks 48% thus far in FY19

SI Reporter/Mumbai 13 Mar 19 | 12:55 PM

Shares of VST Tillers Tractors continued to be under pressure, hitting three-year low of Rs 1,357, down 3.5 per cent, on the BSE in intra-day trade in an otherwise firm market, amid a fall in sales volumes. The stock was quoting at its lowest level since March 1, 2016 on the BSE.

So far in the current financial year 2018-19 (FY19), the commercial vehicles firm has underperformed the market, with its market price nearly halved or 48 per cent from level of Rs 2,631 due to weak sales numbers. In comparison, the S&P BSE Sensex was up 13 per cent during the same time period.

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In the first 11 months (April-February) of FY19, VST Tillers Tractors had reported 24 per cent year-on-year (YoY) drop in total sales at 25,922 units. The company sold 34,111 units during the same period of FY18.

The fall in vehicle sales and higher other expenditures led VST Tillers Tractors to post 57 per cent YoY decline in its net profit at Rs 33.67 crore for the first nine months ended December 2018 (9MFY19). It has posted a profit of Rs 78.27 crore during the same period last fiscal. Operational revenue decreased 16 per cent at Rs 436 crore on YoY basis.

VST Tillers Tractors has been witnessing a sharp de-growth in sales volume domestically both in the power tiller as well as tractor segment with Q4FY19 expected to be on similar lines leading to FY19 being a washout year.

“Sales volumes have been challenging in YTD FY19 with volumes down even in January, February 2019. With a dismal 9MFY19, FY19E is expected to be a washout year. Its increasing dependence on subsidies erodes our margin of safety on the stock," analysts at ICICI Securities said.

A fall in sales volume and consequent margin trajectory (higher fixed overheads) will also dilute return ratios thereby limiting valuation multiple commanded by VST, the brokerage firm said in company update with ‘sell’ rating on the stock and target price of Rs 1,250 per share.

The company has inherited all technical know-how for efficient manufacturing and product development in power tillers & tractors and is a major player in the domestic farm equipment industry.

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