Sell VST Tillers Tractors; target of Rs 1250: ICICI Direct

ICICI Direct's research report on VST Tillers Tractors

VST Tillers & Tractors (VST) continued to report dismal numbers amid a fall in sales volume and muted EBITDA margin trajectory Power tiller volume in Q3FY19 was at 4,507 units, down 35.6% YoY while tractor volume was at 2,063 units, down 2.3% YoY Net sales in Q3FY19 came in at Rs 146.0 crore, down 11.9% YoY EBITDA for the quarter was at Rs 13.4 crore with consequent operating margins at 9.2%. Margins came in lower tracking higher other expenses amid controlled raw material & employee costs PAT in Q3FY19 came in at Rs 10.1 crore. Higher PAT was supported by higher other income, which came in at Rs 6.6 crore.

Outlook

We build in a 310 bps decline in EBITDA margin in FY18-20E. We value VST at Rs 1250 i.e. 15.5x P/E on FY20E EPS of Rs 80.7 and maintain our SELL rating on the stock.