Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Power weeder sales showed a significant increase, with 1,700 units sold compared to 869 units in the same quarter last year.
- The company expects substantial growth in tiller volumes in the second quarter, potentially doubling the first quarter's volume.
- The higher HP tractors have received positive market feedback and are expected to see substantial growth as the distribution network expands.
- The monsoon has been favorable, leading to improved farmer sentiment and better sales prospects for the upcoming quarters.
- The company is on track to launch new products in the US market next year, which could open up new revenue streams.
Negative Points
- Sales of power tillers and tractors declined significantly, with power tillers down 33% and tractors down from 1,471 to 1,293 units compared to the same quarter last year.
- Revenue from operations dropped to INR190 crores from INR246 crores in the previous year, impacting overall financial performance.
- Operational EBITDA fell to INR13.38 crores, representing only 7.02% of revenue, primarily due to a drop in revenue.
- The JV with VST Zetor Private Limited reported a loss, contributing to a lower consolidated financial performance.
- The company has faced challenges in increasing the share of retail finance for tillers, which remains at 4-5%, limiting growth potential in this segment.
Q & A Highlights
Highlights from VST Tillers Tractors Ltd (BOM:531266, Financial) Q1 FY25 Earnings Call
Q: How are the volumes for tillers and tractors expected to move, given the favorable monsoon conditions?
A: We expect substantial growth in tiller volumes in the second quarter, potentially doubling the first quarter's volume. For higher HP tractors, we have started marketing and expect significant growth as the network is established, especially in northern markets. (V.T. Ravindra, Managing Director & Executive Director)
Q: What is the market feedback on the new higher HP tractors?
A: The feedback has been positive, with good performance reports. However, it is too early to project exact numbers, but we expect decent volumes. (V.T. Ravindra, Managing Director & Executive Director)
Q: What were the reasons for the lower Q1 volumes?
A: The primary reasons were the drought situation from the previous year and the delay in monsoon until late June. Additionally, the general elections affected state machinery and subsidy schemes. (V.T. Ravindra, Managing Director & Executive Director)
Q: What is the outlook for EV tractors and exports?
A: We export the drive train for fully autonomous EV tractors built in the US. The outlook is positive, with recent orders indicating better volumes than last year. (V.T. Ravindra, Managing Director & Executive Director)
Q: Can you provide the revenue breakup for the quarter?
A: For the quarter, the SFM business generated INR100 crores, tractors INR60 crores, and the distribution business INR28 crores. (Nitin Agrawal, CFO)
Q: What are the expectations for higher HP tractors and the new distribution network?
A: We are building a network with about 20-plus distributors and expect substantial growth in the second and third quarters. We are focusing on building the network in new markets like UP and MP. (V.T. Ravindra, Managing Director & Executive Director)
Q: What is the outlook for the implements business?
A: The implements business is taking time to build. We have created a separate vertical to focus on this, and we expect it to scale up gradually. (V.T. Ravindra, Managing Director & Executive Director)
Q: What are the reasons for the expected strong growth in the current quarter?
A: The monsoon has been very good, with reservoirs almost full. Additionally, state government subsidies delayed by the general elections are now in place, contributing to the expected growth. (V.T. Ravindra, Managing Director & Executive Director)
Q: When can we expect improvement in realizations and EBITDA margins?
A: With the expected improvement in top-line growth in Q2 and Q3, margins should also improve. (Nitin Agrawal, CFO)
Q: How do you intend to counter competition from established players in the higher HP tractor segment?
A: We are ensuring the profitability of our dealer network and working on product innovations. The Zetor brand is known for quality and power, which should help us compete effectively. (V.T. Ravindra, Managing Director & Executive Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
