Buy VST Tillers Tractors; target Rs 435: Sushil Finance

Sushil Finance's research report on VST Tillers Tractors

"VST Tillers Tractors, farm mechanization in India is essential to improve productivity and overcome the farm labor shortage issue. The government's subsidy encourages farmers to buy farm equipment and drives overall demand for Power Tillers and low HP Tractors amongst others. VST, being an established player in farm equipment segment, is very well placed to cater opportunities in this segment going forward. VST is a debt free company with net cash in balance sheet. The company also has a track record of paying regular dividend and has higher return ratios. The sales volume has improved in Q1FY14 and the management expects to close FY14 with volume growth in both Tractors & Tillers. It also expects margins to stabilize at 14-15 percent level."

"We expect VST's Net Revenues to grow by 13.5 percent & 12.5 percent to Rs. 5,468 mn & Rs. 6,152 mn in FY14E & FY15E, respectively, while its Net profits to grow by 11 percent & 16.2 percent to Rs.539.1 mn & Rs.626.7 mn in FY14E & FY15E, respectively. At the CMP of Rs.360, VST is trading at an attractive valuation 5.8x & 5.0x its FY14E & FY15E EPS of Rs. 62.4 & Rs. 72.5 respectively. We assign 'BUY' Rating on the stock with a target price of Rs 435 (6x its FY15E earnings)," says Sushil Finance research report.

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