Hold VST Tillers Tractors; target of Rs 2220: ICICI Direct

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ICICI Direct's research report on VST Tillers Tractors

VST Tillers & Tractors (VST) reported muted sales volumes in Q1FY19 on both the power tillers and tractors front. For June 2018, power tiller sales volumes came in at 2948 units (down 28.0% YoY) while tractor sales volumes were at 871 units (down 8.7% YoY) For Q1FY19, power tiller sales volume came in at 5,367 units, down 24.6% YoY while tractor sales were at 1,927 units, down 24.6% YoY The weak performance by the company in the less than 30 hp tractor segment comes as a big negative surprise given healthy growth (~20%+) witnessed by leading tractor players indicating a potential loss in market share by VST to competition.

Outlook
We value VST at Rs 2220, i.e. 16x P/E on FY20E EPS of Rs 138.8 with a HOLD rating on the stock. Adding volatility to the earnings is the MTM gains/losses on equity investment book at VST.
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