Release Date: May 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VST Tillers Tractors Ltd (BOM:531266, Financial) reported its highest-ever net profit of INR121 crore for FY24.
- The company achieved its highest-ever EPS of INR140 per share.
- Cash flow from operations improved to INR48.61 crore, surpassing the previous year.
- Export of tractors grew by approximately 16% over the last year.
- The company launched new tractor models under the VST Zetor brand, targeting the 41 to 50 horsepower segment.
Negative Points
- Revenue from operations for Q4 decreased to INR273 crore from INR322 crore in the previous year.
- Tractor sales volumes have significantly declined over the years, with current volumes less than half of what they were in FY18.
- The compact tractor market has seen a substantial drop, particularly in Maharashtra and Gujarat.
- Despite higher cash flows, the company reduced its dividend from INR25 per share last year to INR20 per share this year.
- The EBITDA margin has remained relatively flat over the past decade, not keeping pace with inflation.
Q & A Highlights
Q: Sir, which did all-time high volumes of 11,367 units in FY18, which have now less than half to 5,388. And sir, if we see it is less than what we did 10 years back, which was 7,500 roughly. Sir, whereas if we see that during this period, the tractor industry possibly would have doubled in India. Sir, so basically, when will we accept that probably things are not working out and maybe we can think on the lines of hiving off this -- our tractor division into a joint venture with some foreign big player, sir, like what Escorts has done with Kubota?
A: Yeah, it is a very good question and a very interesting one. I'm Antony Cherukara, CEO of VST Tillers Tractors Limited. See, we have explained that the fact is that we have operating only in the compact tractor segment, and we have not operating in the higher HP segment. And what we are seeing is our growth in tractors. We have said is -- first focus is in terms of capacity utilization. And apart from making tractors for the domestic market, we are looking at supplying drivetrains to the US market, which we have begun successfully. We have also launched the VST Zetor higher HP from the same manufacturing facility. So the key focus is in terms of driving profitability in the tractor business, which we have improved even in this financial year. With the entry into the US market, which is the largest compact tractor segment market, which is 10 times almost -- not 10 times, sorry, 3 times of the Indian compact tractor market or less than 30 HP segment, which is almost 300,000, is the industry size of compact tractors in the US market. We are hopeful that we will be able to create volumes over the next five years in the US market after launch in FY26. Plus, we are also scaling up the higher HP business, which we have not been in, number one. Number two, the drop last year has to be seen from the context of compact tractor market, wherein the compact tractor industry has dropped in Maharashtra and Gujarat while the tractor industry overall would have dropped only 7% to 8%. The compact tractor industry has dropped more than 30% to 40%, and that drop is in line. But with the monsoon picking up, we are expecting that the volumes will pick up, and we will be able to increase the volumes to earlier year levels. So two aspects to this, geographical spread, going geographically to across compact tractors industry. Second, look at utilization with various joint ventures, which we are already in. Third, drive profitability in the tractor business. On all these three fronts, we are progressing as per plan. Looking only at the volume and concluding that these things are not progressing at all in the tractor business of VST Tillers Tractors Limited may not be the correct conclusion.
Q: Sir, so if we see then, again, in April, the announcement that you have made, sir, on an already low base of last year, again, in April, tractor volumes have halved. So --
A: We work only on consumption. We don't push bill inventory into the market. We expect with the monsoons the industry will pick up, April, definitely the monsoon hasn't come. You will see, except for three or four players, nobody else has registered growth in April. And we all know very well from channel check what exactly is happening in the industry.
Q: Sure, sir. Sir, even our agreement with Monarch Tractor, US, sir, even they are getting their tractors manufactured by, I understand, Foxconn instead of VST. Sir, so why aren't we even able to contract manufacturer for others?
A: We are supplying the powertrains. I think we do not have complete information when we are coming to conclusions. We supply the powertrain to Monarch. And apart from the powertrain, there is the drivetrain to Monarch. And apart from the drivetrain, there is the powertrain that needs to go in, which is being assembled at the Foxconn facility by Monarch. So the drivetrain essentially includes, except the power bank that is the battery and the motor, everything else practically. I have said this before in an earlier analyst call, value-wise, it is almost equivalent to a tractor unit that we sell in India. So we expect that business to grow in future, so that contract manufacturing is continuing, and we expect to continue to supply. Of course, we are exploring other opportunities also for contract manufacture.
Q: Sure, sir. And sir, lastly, sir, in your best judgment for the current financial year FY25, sir, what kind of volumes do you expect in tillers as well as tractors?
A: We do not give any forward guidance of volumes, but we expect to grow in both the segments with the normal monsoon happening. We will continue to follow our rigor in terms of following a consumption model. We expect the tractor business to grow by 10% to 15% and the tiller business to grow 15% to 20%.
Q: Sure, sir. And, sir, lastly, sir, we used to mention in our investor presentation about INR3,000 crore revenue target by FY25, sir, but in the latest presentation, I don't think there is any mention whatsoever. Sir, so that target has been postponed to which year?
A: In no investor presentation we have given any guidance on Vision 2025. I have said earlier that we are targeting 2026, that is FY 2026 for Vision 2025. We have not changed that milestone. We are working on it with a normal monsoon and all the projects that we have put in place, each and every one of them is coming into monetization. And we are expecting with tight controls, better profitability, better earnings per share, this company will give growth and more returns to the stakeholders.
Q: Sir, I just wanted to highlight that our EBITDA is the same more or less in past 10 years that around, sir -- last year, we did INR130 crore approx, and in FY14, we did approx INR120 crore. So, sir, we are not even able to keep pace with the inflation. In real terms, our EBITDA in FY24 is probably one-third of what it was 10 years back. Sir, so I hope that going forward, sir, the things change, and sir, your efforts bear fruit. Sir, thank you, very much.
A: I think your statement is wrong if the EBITDA is not one-third of what it was 10 years back. So I would request that the right statement is kindly looked at.
Q: Sir, the EBITDA is flat since 10 years in nominal terms. So adjusted for inflation in real terms, the EBITDA would be
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
