Jul 11, 2016 - Key Financials (` in Cr). Y/E Mar. Net ... Soil Cards to examine soil health and optimize farm ... Strong
VST Tillers Tractors Ltd BUY CMP `1961
Index Details Sensex Nifty
27,126 8323 AutomobilesTractors
Industry
Scrip Details Mkt Cap(` cr) 1,688.9 BVPS (`) 505.8 O/s Shares (Cr) 0.9 Av Vol (Lacs) 0.1 52 Week H/L 2005/1265 Div Yield (%) 0.7 FVPS (`) 10.0 Shareholding Pattern Shareholders Promoters Public Total
% 53.9 46.1 100.0
FY19E PE 19X
After facing a strenuous period over FY14-16 the tractor industry is all set to emerge on the growth track, given the favorable monsoon outlook and the steadfast government initiatives to ramp up the agricultural economy. While bucking the recent bearish trend in industry sales, VST Tillers Tractors Ltd (VST) has not only grow over the said period but enhanced market share both in the tiller and tractors segment. We are optimistic about the company’s performance over the next three years and expect overall revenue to grow at a CAGR of 16.3% to `1017 crore by FY19 while the EBITDA is expected to increase at a CAGR of 17.0% from `113 crore to `181 crore. The PAT, in turn, is expected to increase at a CAGR of 18.3% from `74.1 crore to `122.7 crore. We initiate coverage on VST with a Buy, with a price objective of `2451 (19X FY19) representing an upside potential of 24.9% from the CMP of `1962 over a period of 27 – 30 months. Currently the stock is trading at 15X its estimated earnings for FY19. While our valuation target is demanding, we believe that
VST Tillers Tractors Ltd vs. Sensex
00000000000 a) the dominance in the tillers segment and b) strong growth of the compact tractor segment puts VST in a sweet spot for strong visibility of earnings over the forecast period, while c) robust margins and d) superior return ratios warrant a premium.
400
350 300 250 200 150 100 50
VST Tillers Tractors Ltd
08-Jul-16
08-Mar-16
08-Jul-15
08-Nov-15
08-Mar-15
08-Jul-14
08-Nov-14
08-Mar-14
08-Jul-13
08-Nov-13
08-Mar-13
08-Jul-12
08-Nov-12
08-Mar-12
08-Jul-11
08-Nov-11
08-Mar-11
08-Jul-10
08-Nov-10
0
Our optimism stems from the following: Favorable monsoon and government initiatives augur well for the agricultural sector
Sensex
0000000000000000000;/’;;. I. Key Financials (` in Cr) II.
With the meteorology department forecasting a favorable monsoon and several initiatives taken by the government viz I. Water conservation and irrigation
Net Sales
PAT
EPS
RONW (%)
ROCE (%)
EV/EBITDA
EBITDA
EPS Growth (%)
P/E
Y/E Mar
(x)
(x)
2016 2017E 2018E 2019E
646.7 768.2 887.3 1017.5
112.9 134.8 157.1 180.6
134.8 89.3 105.1 122.7
86.2 103.8 122.2 142.7
7.1 20.4 17.7 16.8
17.6 18.5 18.8 18.9
26.8 28.1 28.4 28.5
22.8 18.9 16.1 13.7
13.6 11.2 9.3 7.9
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STOCK POINTER
Target Price `2451
II. III. IV.
V.
VI. VII. VIII.
IX. X. XI. XII.
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Water conservation and irrigation Crop insurance scheme to provide income security to farmers Soil Cards to examine soil health and optimize farm productivity with regards to judicious choice of crop plantation and fertilizer inputs Market integration towards better price discovery Should help improve farmers’ prosperity and thereby provide impetus for better farming practices and hence, tractor demand.
Monopoly in tillers and significant latent demand potential augur well for VST Despite the previous two years of poor rainfall and negative growth of the tractor industry, VST has grown its tiller sales by 19%. Going forward, we expect tiller sales to grow at 12-13%, leading to a 13.5% CAGR growth in revenues to `519 crore by FY19. Compact tractor segment to see robust growth in the near to medium term As per the management, the compact tractors segment (sub 35 hp) is expected to grow to 2,00,000 units in 4-5 years. VST operates within this segment entirely and is expected to be one of the biggest beneficiaries. Further, it has launched a new model VST Shakti 270 MT (27 hp), which should help propel tractor sales growth. Going forward, we expect tractor sales to grow at 15%, leading to a 21.3% CAGR growth in revenues to `347 crore by FY19.
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Company Background : VST Tillers & Tractors (VST) was founded in 1967 as a joint venture technical collaboration between VST Motors and Mitsubishi Heavy Industries (Japan). Thereafter, over the course of time, VST acquired majority ownership in the company (current holding stands at 51%). The company is a major player in the domestic farm equipment industry, manufacturing power tillers & tractors.VST is also present in the segment of rice translators& power reapers. The company imports the same from China and Japan and sells them in the domestic market, earning a trading margin on the same. VST also exports a few power tillers & tractors to Africa, Russia, Myanmar, etc. VST’s Ltd manufacturing locations
Bengaluru manufactures power tillers of 9HP, 13HP and 15HP Tamil Nadu manufactures tractors with 18.5HP and 22HP
Source: VST Tillers Tractors Ltd, Ventura Research
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Key Investment Highlights Strong operational performance on the cards Historically VST’s revenues have grown at a CAGR of 6.8% from FY12 - FY16 to `647 crore, mainly propelled by market share gains in the tillers segment and a foray into tractors. Given the favorable thrust of the government on increasing rural incomes and patronizing agri growth, we expect VST Tillers to be one of the biggest beneficiaries. Going forth we expect overall revenue to grow at a CAGR of 16.3% to `1017 crore by FY19, driven by faster growth of the tiller segment (13.5% CAGR to `519 crore by FY19) and the introduction of a new tractor model in the 27 hp segment (which should drive tractor revenues by 21.3% CAGR to `347 crore by FY19). Strong revenue growth on the cards
1200
` In Crore
1000
151
129
800 112 600
400 200
97
76 254 80.4 40 194 28 167 67 180 176 111 149
347 299
25 20 87 459 519 53 325 267 346 296 356 402 289 201 232
Tillers
Tractors
FY19E
FY18E
FY17E
FY16
FY15
FY14
FY13
FY12
FY11
FY10
FY09
0
Others
Source: VST Tillers Tractors Ltd, Ventura Research,TMA
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Tractor revenue share set to increase
8
26
26
31
14
13
14
15
15
14
15
31
30
32
30
33
34
34
55
57
54
55
52
52
51
FY18E
7
FY17E
7
FY16
7 20
FY15
80
FY14
100
In %
FY13
120
67
67
61
FY12
73
FY11
40
FY10
60
20
Tillers
Tractors
FY19E
FY09
0
Others
Source: VST Tillers Tractors Ltd, Ventura Research,TMA
Tiller market has huge untapped potential It is quite surprising that Bangladesh, despite having an arable land mass (76,800 Sq. Km)that is only 5% of India’s total arable land mass of 15,69,844 Sq Km, has a tiller market size of nearly 2,00,000 or around 4X of that of India (FY16 sales of 50,000 units). One of the reasons for the widespread use of tillers in the Bangladesh market is the dearth of cattle for agricultural purposes (which are primarily consumed as part of their staple diet).
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State wise arable land
Bangladesh
India
West Bengal
Tamil Nadu
Rajasthan
Punjab
Orissa
Haryana
Chattisgarh
Bihar
Assam
Uttar pradesh
Maharashtra
Madhya …
Karnataka
Gujarat
In lakh Sq.km
Andhra …
18 16 14 12 10 8 6 4 2 0
Source: VST Tillers Tractors Ltd, Ventura Research
Considering the area of arable land of major states of India which is of comparable size with that of Bangladesh, the potential for growth of the tillers market in India is stupendous. In India, mainly cattle is used for ploughing and with the cost of maintaining cattle going up, it is but natural that the shift towards automation would take place sooner rather than later. Also, farm mechanization has a tendency to improve farm yield.
Farm mechanization chart Farm mechanization leads to increase in farm yield Kg/hectare
Kw/hr
2500
2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0
2000
1500 1000 500
Farm Yield
2012-13
2010-11
2000-01
1990-91
1980-81
1970-71
1960-61
1950-51
0
Farm Mechanization (RHS)
Source: EIMA agrimach 2015 report, Ventura Research
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Tillers are the preferred choice for marginal farmers over expensive tractors In a country where farm size holdings are diminishing and there is a rise in the number of marginal holdings, the cost of tractor ownership (range of ~ `2.5-8 lakh/unit) can be quite prohibitive, given the high cost. This, in turn, throws up a huge opportunity for the domestic power tiller sector wherein a power tiller costs ~ ` 1.25 lakh but suffices to perform all requisite agricultural operations performed by a tractor. Further, given the government’s thrust on increasing farm productivity through greater penetration of farm mechanization and its support through various subsidy programmes, power tillers may turn out to be the preferred farm equipment choice for domestic farmers. VST with its dominant share in the tillers market is best placed to exploit this opportunity. Farm holdings
Marginal and small farm holdings have increased while size of holdings have also shrunk
Category of Holding Marginal(< 1 hectare) Small(1-2 hectare) Semi-Medium(2-4 hectare) Medium(4-10 hectare) Large(> 10 hectare) All Holdings (hectare/holding) Holdings (%)
No of Holding (mn) 2000-01 2005-06 2010-11 75.4 83.7 92.4 22.7 23.9 24.7 14 14.1 13.8 6.6 6.4 5.9 1.2 1.1 1 119.9 129.2 137.8 81.8
83.3
Area (mn hectare) 2000-01 2005-06 29.8 32 32.1 33.1 38.2 37.9 38.2 36.6 21.1 18.7 159.4 158.3 1.33 1.23
2010-11 35.4 35.1 37.5 33.7 17.4 159.1 1.15
85
Source: VST Tillers Tractors Ltd ,Ventura Research
Strong Government initiative to improve farm produce to fuel demand for tillers We believe that as the efforts of the government to enhance productivity and double the income of farmers over the next five years bears fruit, demand for tillers would also improve. Pradhanmantri Fasal Bima Yojna (PMFBY) to ensure income security which in turn should lead to increased investments Historically, farm produce has been erratic and highly dependent on precipitation and its timeliness. While the crop insurance scheme is nothing new, however, the earlier NAIS scheme (National Agriculture Insurance Scheme) had many drawbacks which thwarted its success:
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It was implemented only in 14 states of India whereas PMFBY is implemented in all the states of India. Premium of NAIS were higher as compared to PMFBY. Schemes were only given to those farmers who had taken a loan for purchasing agriculture machineries, crop seeds, insecticides, pesticides etc. There was a provision of capping the premium rate due to which low claims were paid to farmers. In PMFBY it is removed and now farmers will get their full claim against the assured sum. The PMFBY (Pradhanmantri Fasal Bima Yojna) has replaced the NAIS, which provides crop insurance to farmers on liberal terms which should go a long way in raising farmers’ income security. The PMFBY scores on many counts over its predecessor the NAIS: Prevented Sowing/ Planting Risk: Insured area is prevented from sowing/ planting due to deficit rainfall or adverse seasonal conditions Standing Crop (Sowing to Harvesting): Comprehensive risk insurance is provided to cover yield losses due to non- preventable risks, viz. Drought, Flood, etc. Post-Harvest Losses: Coverage is available only up to a maximum period of two weeks from harvesting for those crops which are allowed to dry in cut and spread condition in the field after harvesting against specific perils of cyclone and cyclonic rains and unseasonal rains. Localized Calamities: Loss/ damage resulting from occurrence of identified localized risks of hailstorm, landslide, and inundation affecting isolated farms in the notified area. These measures will ensure stability of farm income encouraging investments in automation. Farm subsidy to boost demand for tillers
Subsidy given by the government enables farmers to significantly reduce the cost of ownership
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Government subsidy for tillers General subsidy
Pow er
For reserved category
%
Max Am t
%
Max Am t
8 HP
40
0.6 lakh
50
0.75 lakh
Source: VST Tillers Tractors Ltd, Ventura Research
Good monsoon expectation portend strong sales for tillers The sale of tillers is strongly correlated with the intensity of the monsoon with sales spiking when rainfall has been plentiful and sharply contracting when the rainfall is deficient. And with better rainfall expected during the current year, we expect strong sales during the current year. Tiller sales strongly dependant on good monsoons
80000
as a % of LPA
In %
120
70000
100
60000 80
50000
40000
60
30000
40
20000 20
10000
Tillers Industry Sales
FY19E
FY18E
FY17E
FY16
FY15
FY14
FY13
FY12
FY11
FY10
0
FY09
0
Rainfall (RHS)
Source: VST Tillers Tractors Ltd, Ventura Research
Sales of VST tillers to grow ahead of the market Barring FY11, VST Tillers has always grown faster than the market and during the period FY12-FY16, when the rainfall has been rather erratic, VST has increased its market share (with FY16 seeing a huge share add of 700 bps YoY to 55%).
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The strong growth in FY16 sales can be attributed to new incentive based sales schemes, strengthening of the dealer network, replacement of the sales team by younger, motivated and dynamic personnel, exploring newer markets for tillers
48
57
57
FY19
49
56
FY18
45
55
FY17
44
FY15
43
FY13
49
FY12
47
FY11
50
FY14
In %
60
FY16
VST tillers market share
40
30 20 10
FY10
FY09
0
Source: VST Tillers Tractors Ltd, Ventura Research
We expect tillers’ sales numbers to grow at a CAGR of 12.3% to 38,820 units by FY19 and correspondingly revenues are expected to grow at a CAGR of 13.46% to Rs 519 crore over the commensurate period. Margins which, however, are in the range of ~17% -18%, are more or less expected to trend as per historicals.
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VST tillers revenues to exhibit strong growth
600
` in crore
500 400 300 200 100
FY19E
FY18E
FY17E
FY16
FY15
FY14
FY13
FY12
FY11
FY10
FY09
0
Source: VST Tillers Tractors Ltd, Ventura Research
Low Tractor penetration in India presents a huge opportunity With over 52% of India’s population directly or indirectly associated with the agricultural economy, it is only logical that India’s economy cannot grow while ignoring the agricultural sector. Further, as per World Bank forecasts, the workforce in the rural segment is expected to drop to 25.7% by 2050 thereby giving an impetus to farm mechanization. Tractors constitute a bulk of the farm mechanization industry and India’s tractor penetration being one of the lowest among major economies represents significant latent demand. Although tractor penetration has increased from one per 150 hectares to one per 30 hectares in 2015, it is still one of the lowest among major economies. Further, given the fact that use of proper equipment can increase the productivity by up to 30% and reduce costs by ~20%, the need for farm mechanization is a top priority. Recognizing this, the Modi government has announced path breaking reforms in the agricultural sector, which should boost the trajectory of growth.
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Agricultural reforms announced in Budget 2016
Agriculture reforms in budget 2016 Farmer welfare & education • Allocation for Agriculture and Farmers’ welfare has increased from `15,000 crore to ` 35,984 crore. • Promote organic farming through ‘Parmparagat Krishi Vikas Yojana’ and 'Organic Value Chain Development in North East Region'. • To reduce the burden of loan repayment on farmers, a provision of `15,000 crore has been made in the BE 2016-17 towards interest subvention. • Allocation under Pradhan Mantri Gram Sadak Yojana increased to `19,000 crore. Will connect remaining 65,000 eligible habitations by 2019. • Allocation under Prime Minister Fasal Bima Yojana ` 5,500 crore. Irrigation • ‘Pradhan Mantri Krishi Sinchai Yojana’ to be implemented in mission mode. `28.5 lakh hectares will be brought under irrigation. • Implementation of 89 irrigation projects under AIBP (Acclerated Benefit Irrigation Programme), which are languishing for a long time, will be fast tracked. • A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about ` 20,000 crore. • Programme for sustainable management of ground water resources with an estimated cost of ` 6,000 crore will be implemented through 3 multilateral funding. • 5 lakh farm ponds and dug wells in rain fed areas and `10 lakh compost pits for production of organic manure will be taken up under MGNREGA. Soil & Seeds • Soil Health Card scheme will cover all 14 crore farm holdings by March 2017. • 2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years. Marketing of Agricultural Products • Unified Agricultural Marketing ePlatform to provide a common e- market platform for wholesale markets.
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VST a strong player in 20 HP Segment The tractor industry in India can be bifurcated on the basis of power. VST is present in the lowest category i.e. sub 20 HP, which constitutes 4.1% of the total tractor industry. Player wise breakup of tractor industry (In %)
1
1
1
25
24
23
10
10
12
12
41
40
38
38
6 12
6 11
7 10
9 9
FY15
FY16
1 25
FY14
in %
FY13
100 90 80 70 60 50 40 30 20 10 0
Escorts
John Deere
M&M Group
Sonalika
Tafe Group
VST Tractors
Source: VST Tillers Tractors Ltd, Ventura Research
Player wise breakup upto 30HP tractor (In %)
3 year CAGR growth - 6.7%
14
FY13 total tractor sales 66562 units
9 18
27
49 56
4 8
FY16 total tractor sales - 54736 units
4
11
M&M
Sonalika
Others
Tafe
VST
Source: VST Tillers Tractors Ltd, Ventura Research
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Compact tractor segment to grow manifold Although this segment has experienced tepid growth over the last few years, the management believes that the compact tractors segment should grow 4X (to 2,00,000 units from the current 55,000 units over the next 4-5 years). VST has made significant inroads and grown faster than the market (18% CAGR over FY11-FY16). Its current market share stands at an enviable 33% in the sub 20HP segment. We believe that VST’s performance will continue to outstrip the segment growth and project sales should hit 11,535 units by FY19 (15 % CAGR for sub 20 HP segment). VST Tractor sales in units
14000
in units
12000 10000 8000
6000 4000 2000
FY19E
FY18E
FY17E
FY16
FY15
FY14
FY13
FY12
FY11
FY10
FY09
0
Source: VST Tillers Tractors Ltd, Ventura Research
VST entering new segment Recently VST has also made a foray into the 30 HP segment with the launch of its model VST Shakti MT 270 (27 HP). Initial sales of 150 units in the last two months of the previous year are encouraging and the management is hopeful of selling 1000 units. However, we have conservatively modeled 950 nos. in our forecast for FY17 with sales scaling 1425 units by FY19. Overall forecasted sales for the tractor segment should grow at a CAGR of 18% from the current 7,801 to 12,960 units by FY19. Accordingly, revenues from tractor sales should grow at a CAGR of 21% from the current `194 crore to `347 by FY19. - 14 of 22-
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Brisk growth in VST tractor revenues
400
` in Crore
350 300 250 200 150
100 50
FY19E
FY18E
FY17E
FY16
FY15
FY14
FY13
FY12
FY11
FY10
FY09
0
Source: VST Tillers Tractors Ltd, Ventura Research
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Financial Performance : In Q4FY16, VST’s consolidated revenues grew by 26% to `177.3 crore driven by some aggressive marketing schemes as well as the launch of the 27-HP tractor towards the fag end of the year. Although the EBIDTA margin contracted by 100 bps to 17%, the EBITDA grew by 15% to `29.5 crore over the same period. The PAT came in flat at `19.5 crore compared to `19.0 crore in Q4FY15, due to an increase in the depreciation cost by 15% and tax expenses by 20% and a decrease in other income by 18% compared to Q4FY15. Overall, for FY16 the consolidated revenue increased by 17% YoY to `646.7 crore. The EBITDA at `112.9 crore was 12.7% higher compared to `100.2 crore in FY15. However, margins contracted by 100 bps. In FY16, the PAT grew 6.6% to `74.1 crore compared to `69.5 crore.
Quarterly financial performance (` in crore) Particulars
Q4FY16
Q4FY15
FY16
FY15
Sales
177.3
140.9
646.7
551.6
Growth
26%
Expenditure
147.9
115.3
533.8
451.4
EBITDA (ex Ol)
29.5
25.7
112.9
100.2
as a % of sales
17%
18%
17%
18%
Depreciation
3.2
2.8
12.5
9.4
EBIT(Ex.Ol)
26.3
22.9
100.3
90.8
Other Income
4.7
5.6
12.3
11.9
EBIT
30.9
28.6
112.6
102.7
Margin %
17%
20%
17%
19%
Interest
0.7
0.5
2.6
2.1
PBT
30.3
28.1
110.0
100.5
Margin %
17%
20%
17%
18%
Provision for tax
10.8
9.1
35.9
31.0
PAT
19.5
19.0
74.1
69.5
PAT Margin %
11%
13%
11%
13%
17%
Source: VST Tillers Tractors Ltd, Ventura Research
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Financial Outlook : We expect VST’s revenue to grow at a 3 year CAGR of 16.31% to `1017 crore by FY19 driven by the growth at 13.46% CAGR in tillers sales to `519.4 crore and the 21.35% CAGR rise in tractor sales to `346.7 crore, respectively. Margins are expected to increase from 17.5% in FY16 to 17.8% in FY19. The EBITDA is expected to increase at a CAGR of 17.0% from `113 crore to `181 crore. The PAT is expected to increase at a CAGR of 18.3% from `74.1 crore to `122.7 crore. Brisk growth in revenues
Revenue
EBITDA
Revenue growth (RHS)
FY19E
FY18E
FY19E
FY18E
FY17E
FY16
FY15
FY14
FY13
FY12
FY11
0
FY17E
200
FY16
400
FY15
600
FY14
800
FY13
1000
In %
20 18 16 14 12 10 8 6 4 2 0
35 30 25 20 15 10 5 0 -5 -10 -15
FY12
In %
FY11
In crore 1200
EBITDA margin to stay stable
PAT
Source: VST Tractors Tillers Ltd, Ventura Research Source: VST Tractors Tillers Ltd ,Ventura Research
ROE and ROCE to remain stable In % 60 50 40 30 20 10
ROE
FY19E
FY18E
FY17E
FY16
FY15
FY14
FY13
FY12
FY11
0
ROCE
Source: VST Tillers Tractors Ltd, Ventura Research
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Peer comparison
Y/E March
Sales
EBITDA
EBITDA PAT Margin (%) Margin (%) ROE(%)
PAT
P/E
P/BV
EV/ EBITDA
VST Tillers 2015
552.0
100.0
70.0
18.1%
12.7%
20.6%
23.6
4.5
14.2
2016
647.0
112.9
74.1
17.5%
11.5%
17.6%
22.0
3.9
10.9
2017E
768.0
134.8
89.3
17.6%
11.6%
18.5%
18.3
3.4
9.2
2018E
887.0
157.1
105.1
17.7%
11.8%
18.8%
15.6
2.9
7.8
2019E
1,017.5
180.6
122.7
17.8%
12.1%
18.9%
13.3
2.5
7.8
2015
38,391.6
4,232.6
3,321.1
11.0%
8.7%
18.4%
21.1
3.7
16.6
2016
40,396.7
4,571.2
3,167.5
11.3%
7.8%
15.5%
22.6
3.3
15.1
2017E
46,903.0
5,642.4
3,790.0
12.0%
8.1%
16.4%
23.5
3.5
15.6
2018E
53,533.9
6,570.5
4,505.7
12.3%
8.4%
16.8%
19.9
3.1
13.4
2019E
60,150.2
7,261.0
4,993.8
12.1%
8.3%
17.4%
17.6
2.8
12.1
2015
4,112.7
160.5
75.7
3.9%
1.8%
4.1%
20.4
0.9
0.4
2016
3,537.6
146.4
76.3
4.1%
2.2%
4.2%
32.8
1.4
0.7
2017E
4,103.4
272.3
153.2
6.6%
3.7%
7.9%
16.5
1.3
0.6
2018E
4,727.5
340.4
208.7
7.2%
4.4%
10.0%
12.1
1.2
0.5
Mahindra & Mahindra
Escorts Ltd
Source: VST Tillers Tractors Ltd, Ventura Research
Attractive ROE as compared to peers
25 20
Mahindra
P/E
15 VST Tillers
Escorts
10 5
20
18
16
14
12
10
8
6
4
2
0
0
ROE
Source: VST Tillers Tractors Ltd, Ventura Research
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Valuation : We initiate coverage on VST with a Buy, with a price objective of `2451 (19X FY19), representing an upside potential of 24.9% from the CMP of `1962 over a period of 27 – 30 months. Currently, the stock is trading at 15X its estimated earnings for FY19. While our valuation target is demanding, we believe that the following factors warrant a premium: I. the dominance in the tillers segment II. strong growth of the compact tractor segment puts VST in a sweet spot for strong visibility of earnings over the forecast period III. robust margins IV. superior return ratios
VST P/E chart 2500
VST P/B chart 2500
Price in `
Book value in `
2000
2000
1500
1500
1000
1000
500 500
2X
4.5X
7X
9.5X
Source: VST Tractors Tillers Ltd, Ventura Research
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12X
CMP
0.5X
1X
1.5X
2X
Mar-16
Mar-15
Mar-14
Mar-13
Mar-12
Mar-11
Mar-10
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
Mar-04
Mar-16
Mar-15
Mar-14
Mar-13
Mar-12
Mar-11
Mar-10
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
Mar-04
Mar-03
CMP
Mar-03
0 0
2.5X
Source: VST Tractors Tillers Ltd ,Ventura Research
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Monday 11 July, 2016 This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
VST EV/EBITDA chart 1800
EV in crore
1600 1400 1200 1000 800 600 400 200
EV
2X
3.5X
5X
6.5X
Mar-16
Mar-15
Mar-14
Mar-13
Mar-12
Mar-11
Mar-10
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
Mar-04
Mar-03
0
8X
Source: VST Tractors Tillers Ltd, Ventura Research
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Monday 11 July, 2016 This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
Financials and Projections
Y/E March, Fig in ` Cr
FY16
FY17E
FY18E
Y/E March, Fig in ` Cr
FY19E
646.7
% Chg. Total Expenditure
533.8
% Chg. EBDITA EBDITA Margin % Other Income PBDIT Depreciation
FY18E
FY19E
768.2
887.3
1017.5
Adj. EPS
86.21
103.79
122.17
142.69
18.8%
15.5%
14.7%
Cash EPS
100.3
118.9
138.3
159.3
633.4
730.3
836.9
18.7%
15.3%
14.6%
112.9
134.8
157.1
180.6
17.5%
17.6%
17.7%
17.8%
12.3
13.8
16.0
19.3
125.1
148.6
173.0
199.9
DPS Book Value
13.0
13.0
13.0
13.0
488.5
559.6
648.4
755.5
0.0
0.0
0.0
0.0
Capital, Liquidity, Returns Ratio Debt / Equity (x) Current Ratio (x)
5.4
4.6
5.5
6.3
ROE (%)
17.6%
18.5%
18.8%
18.9%
ROCE (%)
26.8%
28.1%
28.4%
28.5%
12.5
13.5
14.4
14.9
Interest
2.6
1.9
1.8
1.8
Dividend Yield (%)
Exceptional items
0.0
0.0
0.0
0.0
Valuation Ratio (x)
PBT
FY17E
Per Share Data (Rs)
Profit & Loss Statement Net Sales
FY16
110.0
133.2
156.8
183.2
P/E
22.8
18.9
16.1
13.7
Tax Provisions
35.9
44.0
51.8
60.4
P/BV
4.0
3.5
3.0
2.6
Reported PAT
74.1
89.3
105.1
122.7
Minority Interest
0.0
0.0
0.0
0.0
Share of Associate
EV/Sales EV/EBIDTA
2.4
2.0
1.7
1.4
13.6
11.2
9.3
7.9
Efficiency Ratio (x)
0
0
0
0
74.1
89.3
105.1
122.7
Inventory (days)
45
38
35
32
PAT Margin (%)
11.5%
11.6%
11.8%
12.1%
Debtors (days)
70
73
73
73
RM / Sales (%)
65.1%
64.8%
64.8%
64.6%
Creditors (days)
18
24
20
18
8.6
8.6
8.6
8.6
110.0
133.2
156.8
183.2
PAT
Balance Sheet
Cash Flow Statement
Share Capital Reserves & Surplus
Profit Before Tax
411.5
472.7
549.0
641.1
Minority Interest
0.0
0.0
0.0
0.0
Working Capital Changes
Long Term Borrowings
0.0
0.0
0.0
0.0
Others
-55.0
9.4
6.4
16.0
Deferred Tax Liability
4.6
5.3
5.9
6.3
Operating Cash Flow
72.3
123.5
141.5
167.2
Other Non Current Liabilities
Depreciation
13.5
14.4
14.9
4.7
-32.7
-36.2
-47.0
38.7
38.2
39.0
42.0
-5.6
-19.6
-17.2
-14.0
Total Liabilities
463.3
524.8
602.5
698.0
Other Investment Activities
-21.8
3.6
4.0
6.3
Gross Block
189.4
208.4
225.0
238.5
Cash Flow from Investing
-27.3
-16.0
-13.2
-7.7
Less: Acc. Depreciation Net Block
Capital Expenditure
12.5
62.4
75.9
90.4
105.3
Changes in Share Capital
0.0
0.0
0.0
0.0
127.0
132.4
134.7
133.2
Changes in Borrowings
0.0
0.0
0.0
0.0
Dividend and Interest
-18.2
-17.6
-17.5
-17.5
Cash Flow from Financing
-18.2
-17.6
-17.5
-17.5
Net Change in Cash
Capital Work in Progress
2.8
3.5
4.0
4.5
Other Non Current Assets
16.5
16.5
16.5
16.5
305.5
360.8
435.3
531.8
26.7
89.9
110.8
142.0
11.5
11.6
12.0
12.0
Opening Cash Balance
18
28
50
75
463.3
524.8
602.5
698.0
Closing Cash Balance
28
50
75
110
Net Current Assets Long term Loans & Advances Total Assets
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Research Analyst (RA) involved in the preparation of this research report and VSL disclose that neither RA nor VSL nor its associates (i) have any financial interest in the company which is the subject matter of this research report (ii) holds ownership of one percent or more in the securities of subject company (iii) have any material conflict of interest at the time of publication of this research report (iv) have received any compensation from the subject company in the past twelve months (v) have managed or co-managed public offering of securities for the subject company in past twelve months (vi) have received any compensation for investment banking merchant banking or brokerage services from the subject company in the past twelve months (vii) have received any compensation for product or services from the subject company in the past twelve months (viii) have received any compensation or other benefits from the subject company or third party in connection with the research report. 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None of the company or its directors or any other person accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising in connection therewith. The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and Exchange Board of India before investing in Securities Market. Ventura Securities Limited Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai – 400079
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