VST Tillers Tractors Ltd
NSE:VSTTILLERS
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VST Tillers Tractors Ltd
Earnings Call Analysis
Summary
Q1-2025
V.S.T. Tillers Tractors Limited experienced a revenue drop to INR 190 crores in Q1 FY25 from INR 246 crores year-over-year. This decrease impacted the operational EBITDA, which fell to INR 13.38 crores. Despite these challenges, the company expects substantial recovery in Q2, with significant tractor and tiller volume increases anticipated. A 15-20% growth in tractor volumes from last year is projected. Additionally, the introduction of higher HP tractors is promising, with positive market feedback. Future growth initiatives also include a focus on improving retail finance and expanding the distribution network.
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Ladies and gentlemen, good day, and welcome to V.S.T. Tillers Tractors Limited 1Q FY '25 Post-Results Conference Call. From V.S.T. Tillers Tractors Limited management, we have with us today Mr. V.T. Ravindra, Managing Director; and Mr. Nitin Agrawal, Chief Financial Officer.
Now I'll hand over the call to the management for a presentation and the opening remarks to be followed by the question-and-answer session. Over to you, sir.
Yes. Good evening, everyone. My name is Nitin Agrawal. I'm Chief Financial Officer of the company. I'll take you through the key numbers for the quarter. First is the safe harbor statement on projections. And in terms of financials, first, we'll talk about the sales number. Then I'll touch upon the Q1 results for a stand-alone basis and then on a consolidated basis. And then we can open up the floor for the question and answers.
Yes. So moving on, these are the sales volume for our SFM business, which is smart farm machineries as well as tractors. So as you can see on the screen, in the quarter, we have sold around 6,089 power tillers, which is down about 33% in the corresponding quarter for last year. Similarly, tractors, 1,293 numbers of tractors we have been able to sell against 1,471 in the last quarter -- same period last quarter. Power weeder has, of course, shown quite a healthy growth, I would say. We have been -- we have sold around 1,700 power weeders against 869 of last year quarter.
Moving on, on the results. So revenue from operation for the current quarter is around INR 190 crores against INR 246 crores of last year. At an EBITDA level, we are INR 34.7 crores. As a percentage, this is around 16.37%. What we do is we also calculate operational EBITDA in which we ignore the other income part completely because lot of other income will include mark-to-market gains, so we exclude that completely. So on operational EBITDA level, we are INR 13.38 crores, which is about 7.02%. The profit before tax stands at INR 27.94 crore, which is 13.18%, and PAT is at 22.85. As you can see, the main reason of drop in operational EBITDA is because of the drop in revenue of around INR 55 crores. Yes, that's the main reason of drop in operational EBITDA. So this was on stand-alone basis. In the next slide, I'll talk about the consolidated financials.
So revenue from operation remains the same. The difference is we have a JV with the name of VST Zetor Private Limited, in which V.S.T. hold 51% of the JV. So during the quarter, the JV had a loss of -- our share of loss from the JV is INR 0.38 crores, which means that operational -- so that's the only difference between the consolidated and stand-alone number. So operational EBITDA is around INR 13 crores from this. PBT is 27.56, which is as a percentage, 13%.
Moving on. We -- so Q1 has been low for us due to various reasons, but we have seen the sign of recovery in July. So I just captured in this slide about the sales numbers for power tiller for July, which is around 5,100 tillers and tractors is at 439. Yes. So that's all I had to cover in the PPT. Now we can open for question and answers.
[Operator Instructions] First question will be from Mr. Ashish.
So if you could explain about how things are expected to move on the volumes for both tillers and tractors from now on, given the monsoons are fine this year? Plus the higher HP tractors that we were intending to launch. So what's the status? What's the expectation around that? So some sort of qualitative comments will be helpful for us.
Now coming to the second quarter, we expect substantial growth on the pillar volumes as compared to the first quarter, which means we should be at least doubling the volume over the first quarter. And on the higher HP also, we have started marketing the higher HP. The first quarter, we did about 40 tractors and the network has just started coming into place and we'll get substantial growth coming in the second quarter from higher HP because the network is just coming into place, especially in northern markets where we are not present early.
Okay. So what's the market feedback like for the new products that we've gone in with? So is it hinting towards maybe a decent success that we can expect or are there certain teething issues or whatever? I mean, if you could share on those so that we can build up what expectation the company has in terms of volume sales, maybe given the things on the ground as of now?
So can you repeat your question, please?
No. So the entire expectation that has been built around the new products, given the higher HP. So what sort of visibility you have, what are you gaining from your distributors on the ground as to how much to build on in terms of expectation of sales overall, maybe in the first year? Anything to share on that will be helpful.
See, the advantage would be that we are now entering the market. This segment is the biggest segment, which you see in the tractor industry. It's a 5.5 lakh plus segment, this segment of 40 to 50-horsepower. So we weren't present really in this segment. So now we have the advantage of going to those markets where the higher HP are strong, those are predominantly markets like UP or MP and those markets where -- this will give us a base for the entire network -- building a network in those markets.
Okay. So are you suggesting that it's too premature to guess as to how the numbers would pick up on the volumes over the course of the year for this?
Yes. Numbers, difficult to project right now. But we see that there would be good traction for this product because the product itself has been well accepted. The feedback on the performance has been good. So we expect that we should be looking at decent volume though we were not sure of what the exact number would be like.
Okay. Any base case assumptions on this, sir? Possible?
Right now, I think it's too early to comment on that.
Okay. Okay. And what's the distribution network like for these new launches?
Yes. Presently, we have about 20-plus distributors already in -- who have started operations on this. And we look at that numbers are growing substantially in the second and third quarter.
And on the JVs and basically, the export markets that we were targeting, anything to share on those aspects?
Exports as of now, we haven't started because we are concentrating on first building a network here. Exports, you are talking with the exports with reference to Zetor JV only?
Yes.
No, we haven't yet started marketing on the export front. That we would be looking at probably from the third quarter onwards.
The next, I'll unmute Mr. Shrayansh. Please unmute and ask your question.
You mentioned you have -- the Q1 volumes were lower due to various reasons. Can you just spell those reasons out?
Yes. The first one was primarily the drought situation in the end of last year that carried over till June, the monsoon only released -- monsoon started off in end of June onwards. Only after the rains came, the sentiments of the farmers picked up really. Then most of our markets were on the back of a drought of last year, the sentiment was very poor with the farmers.
Second issue was that because of the elections, general elections, at that time, both the state missionary and also the focus on the subsidy schemes were not there in the first quarter. So all those have now started off in the second quarter, and we see that the traction is building up and these volumes are back [indiscernible].
Okay. Got it. And what you are expecting 12,000-odd pillars volume in Q2. And what is your tractors expectation for the volume?
We will put a number, but yes, we were looking at decent growth on last year. So we should be looking at 15% to 20% on last year's volume.
20%, right.
Yes.
[Operator Instructions] In the meantime, I'll go for some questions in the chat box. Sir, can you give a brief outlook on this EV tractors, what we do some exports on our business?
Yes. We don't export the tractor itself. We do the drive train for each tractor. That is a driverless, fully autonomous tractor that is built in the U.S. We built the complete drive pin from, gearbox and the front and rear actual and the chassis, that is what we send from here.
And then another question is, what is the outlook for that and how it can scale up, sir?
Yes, the outlook for that is fairly good. We are seeing recent orders for that in the -- this quarter. So I think volume should be better than the last year.
And then the next question is on the implement, sir. What is the outlook for implements and how do you see it going forward?
The implement business is something that we are working on. It is taking a little time to build that business or primarily, I suppose you are referring to the rotavators and those sort of implements?
Yes, sir.
Yes. No, that's -- we are working on that. We have built a separate vertical to focus on that business. And as I said, that's probably taking a little time to scale up.
Shrayansh, your questions are over or you are still on the queue?
I have one more question, yes. So can you provide the revenue breakup for the quarter in your tractor or tillers and implements?
Yes. So for the quarter, SFM business has done around INR 100 crores. Tractors is around INR 60 crores. Distribution business is around INR 28 crores.
A question in the chat box, but I think partially have answered already, but what are the reasons for the demand weakness that we witnessed in 1Q? That was the question. I think you already answered that, I think.
Yes, we have already answered this, mainly because of monsoon and general elections.
And so now, we are expecting strong growth in the current quarter. What is the specific reason for that?
Reason is the monsoon has been very good. All reservoirs are almost cool. Across the country, I can say, monsoon is either surplus or less. So with this, we definitely expect the sowing season to be very good, and it's already showing signs of picking up. That's the primary reason. The second reason, as I said, wherever the state government subsidies were supposed to come out the first quarter, they've got pushed to the second quarter because of the general elections, and those are also falling in place. So that should also give us some additional traction on volumes.
And there's a question in the chat box, sir. When can we expect improvement in realizations and EBITDA margins?
Yes. So as we said that Q2 is looking better for us, so definitely, margins should improve in Q2 and Q3 as well.
With the top line improving, automatically we will see an improvement in the EBITDA.
And again, though this question also partly is answered, but again, what is the estimate on volumes in Zetor over the next 2 years?
Right now, we are not able to put a figure. But yes, we will -- as I said, we are looking at fairly large volumes on this because this is a segment that we are entering new resource. Right now, we don't comment on any volume.
In the next 2 questions also partially you answered already. How is the customer feedback towards Zetor tractors as of now?
Yes. As of now, the feedback is good. The performance has been very good. So we expect the tractor to do well.
And in the field, is people able to recollect the HMT brand associated with Zetor or that is long back, and people are not able to associate Zetor with the HMT now?
There are some markets which are able to recollect the brand and in the strong headwind, the Zetor HMT markets, there is a brand recall.
See, considering the above normal monsoon -- yes, one minute sir, I'll read the full -- there is a big question. We have seen -- yes, for tractors, I think. We have -- we are now clocking around 40 numbers per month in FY '24. And despite Zetor launch, we have not seen much pushing of our volumes as of now. Considering the above normal monsoon for FY '25, do we have any kind of target where we aspire to reach in the current year as well as next year? From the current 450 levels, where do you believe we can go up to broadly? That is the question, sir.
Broadly, we believe that we should be definitely looking at 15-plus percent growth from last year.
See, have you launched Zetor on PAN India basis?
No, it will take us time to build a network in PAN India. So we have started in a few states. And slowly, we will build the higher horsepower network across the country.
But the new networks, whatever we are building, they are selling only Zetor tractors or they will be selling our lower HP tractors? Also, it's a combined network, sir, how the new networks are coming up?
See, some of the markets which we are entering with Zetor are new markets. So we have to establish the new network. Wherever our existing dealers are interested, we are also giving them the opportunity of taking the Zetor tractor dealership.
Yes, yes. But for the new -- if have establish a new network, there they will be selling both Zetor as well as our normal lower HP tractors also, sir, or that's only exclusively for Zetor?
The new dealers will have an option to also sell our existing range of tractors.
But most of those markets, the smaller trackers may not be a big market, sir? Like you...
That's correct. So it really depends. If it makes sense for the dealer and for us, then definitely, we will also give them the smaller tractor range.
Again, a clarification on the chat box, 15% growth is for the company as a whole for FY '25? Or is it only for tillers or tractors?
Question was specific to tractors, so that was my answer for the tractor segment.
But even tiller, we estimate similar growth, sir?
Yes. Tiller also, we expect -- definitely that growth we are expecting in tiller also.
Yes. Some people have come on queue, sir. I will unmute Mr. Devanshu, you can ask your question.
Yes, so a couple of questions. So in your growth target that we have, which is the aggressive growth target you have set for the next 4, 5 years, higher HP tractors is, of course, supposed to be playing a pretty strong role in the contribution incrementally, right? So that is one. But we are -- we have been hearing from Mr. Cherukara and from the team that this is going to be a very strong growth driver. But from what you are saying that the rollout, it seems is very slow versus what the -- at least what the commentary was. So if you can just help me with understanding what was the initial target and why is it? Are we behind target? And what is the reason for that? Why are things going much slower than anticipated?
We just rolled out, yes, in the end of last year, the first batch of tractors. And this is the first quarter that we have really taken into the dealerships. And the network itself, we are just building. So that will also require little time. That's what we see because it's in new markets. We are entering UP, MP, Rajasthan, these are all new markets for us. We are really -- we don't have a very big presence there with our earlier product range. This product would need to have a network in those years. So that's taking a little bit of time.
So to clarify, I mean, because our presence in the north is not so strong and because this market is a higher HP tractor market which is why we're looking over there. But what about your existing regions? Is that not something that we are looking at pushing for the higher HP tractors? In your existing markets that you're strong in, are we scaling up over there? Or is it entirely something we're looking at for the northern states?
Yes. Just looking at a strategy where the higher HP market is particularly strong and looking at, we can say, area-wise strategy so that we don't have to -- we will not go all over the place initially. So we just identified a few areas where we'd like to concentrate initially and then take it across.
Sure. And second question I had was on the share of the tiller financing in terms of volumes. The number last , if I remember correctly, was about 4% to 5%. Now that we have -- I mean, the aim is to rely less on the subsidy and provide financing. So has this number -- is it trending the same in terms of your volume contribution? Or has this scaled up?
Yes. So in terms of retail finance, if I understand the question, it's more on retail finance. So we are roughly at the same percentage which you mentioned, around 4% to 5%, but we hope this number to grow quarter-on-quarter.
Sure, sure. And last question I had, since Mr. Ravindra is also on the call, would like to get his view on this. We've been talking about the land bank and monetization for many years now. And the plan is always -- I mean, it's always being pushed at least from what we hear. So just to get some clarity. Is this something that's on the cards entirely or can we not expect it to happen any time soon?
It won't happen immediately. To be honest, we are, at present, using the setup there for our warehousing. And -- but yes, there is some -- I mean, we need to discuss this at the Board level really, and there is a long-term plan, but nothing will happen in the short term.
Next, I'll unmute Shrayansh. Please ask your question.
Sir, for the past few years, like you guys have been talking about increasing your finance share. I think somewhere you even mentioned in some con call that you're going to increase it to 30% in a year, and that didn't happen. It's still at 4% to 5%-odd. So what is the deterrent which is stopping you, like what is the main issue? Why is this not increasing?
Yes. So I'll answer the question. So basically, tiller is not a registered product like tractor. So you have -- so that's one topic. Second is the income level of the farmer who is small and marginal is comparatively lower. So the bank does not have -- they basically want -- they find this risky because the asset is not having a registration number. So hypothication becomes a challenge. And second is the low paying capacity of the farmer. So these are the 2 primary reasons which we found that because of these retail finances are low. To overcome this, what we are doing is we are doing tie-ups in some cases, maybe law sharing as well, if it's really required to push the case. And that's what is seeing the traction now.
So this is improving now, right?
Yes, this is improving now. Yes.
We will take only one question from the chat box. Can we get some understanding on revenues from Monarch?
Yes. Around INR 5 crores is revenue from Monarch in this quarter. We expect this to grow in coming quarters.
Okay. There is only one more question from the chat box, sir. Probably we'll finish up with that. Any color on how do we intend to counter competition from established players on higher HP tractors? How do we aim to distinguish our product from competitors? That is on Zetor, sir.
What I would say is, one is, see, we are working with the network to ensure that the network of the -- our tractor dealers are profitable. So this will ensure the long-term viability of the network. And number two is also on the product side, we are working on some innovations. And Zetor tractors also, as a brand, have recall and they are known for their big quality and the power. So this should also help us in taking on the competition.
Okay. Some more people have come on the queue. I'll unmute Arjun Khanna.
The first question is regarding the tractor piece where we are estimating a 15% growth this year. I understand, sir, we have even launched utility tractors on the compact side. That itself increases the target market size apart from V.S.T. Zetor. So in this environment where we are expecting a good monsoon in key markets of Maharashtra and Karnataka, why is the growth estimate just 15%?
Yes. We've just launched that product. So we need to see how that product is accepted and I would be here. So just -- you are right, we have one more product in our stable, but right now, we don't want to jump the gun by projecting any higher volume on that.
Right. Just that the context is if I go back, maybe FY '21, we did roughly 9,000 tractors, 8,800. We did just 4,800 in FY '24. So if we just go back to earlier levels with the earlier range, we should be up substantially. That's -- is there something...
Yes, we will get there. That's the intent.
Sure. Secondly, in terms of power tillers, we had an announcement to the exchange where we do believe the market potentially could get to almost 1 lakh power tillers. In terms of production last year was just in terms of our sales, almost 36,000, 37,000 units, assuming we have 60%, 70% of the market. If the goal is that the market can be 1 lakh units, why would we be growing at just 10%, 15%, sir?
Yes. So Arjun, I think that 1 lakh number, which Mr. Antony Cherukara has been mentioning, it's a long-term number. It's not in 1 or 2 years, we are looking at. If you look at the old transcripts as well, that's, I would say, a long-term target, which we believe that industry has the potential. But for this year, we are taking 15% of growth target as Mr. Ravindra mentioned, it's more to be modest, I would say.
Sure. Thirdly, if you look at the power weeder side, we had mentioned we would set up manufacturing capacity of 6,000 units this year. Are we on track for the same?
Yes, we are on track for that. We are -- we have started work on the [proto] weeders going to develop with the weeders in-house. They should be out by the third quarter, we should have couple of models for testing purpose. And I think by the fourth quarter, we should be able to start marketing up the weeders that completely will try us.
Sure. That's heartening to hear, sir. In terms of pricing, would this be significantly lower than the imported models we are selling at this point in time?
No, I don't think so. I don't believe that there will be a huge price saving because right now, many of the weeders that are imported are cheaper weeders that really don't last. So we want to give a good product, and we don't want to play on the price. Rather than that, we give a quality product and establish the product for the long term.
Right, sir. I was referring to the products we are importing. Are we also importing Chinese products and selling of the number?
Yes. We are importing some new products right now. Yes, we are in the higher end of the range that is -- we have started with only few products which are the quality products. That's why even now as far as pricing is concerned, maybe we are higher priced than the competition. And I believe even when we [indiscernible] the products, we really won't be playing in the cheaper segment.
Sure. Sir, we had talked of a potential JV or leads with Kobashi. Has there been any further update on that, sir?
No. It's taking a little time. The Japanese are taking a little time to come back on that. We are hoping to hear from them by this month end. So we should have some clarity for you by the next quarter. It's not shared or anything. So it's still just work in progress, that's all.
And just the final question, sir, from my side. If one looks at capital allocation, we have significant amounts of cash on balance sheet, and you mentioned in the long-term potential sale of land, which should further add to cash balances. How do you look at the capital expenditure for the company over the next 2 years? And what could be potential ways to speed up growth?
Coming to the land, firstly, we are not clear whether we're selling it or we're developing it. We don't know that. It's the decision that will be taken by the Board. So I don't let -- I won't comment on that right now. But yes, we are looking at various ways of deploying the reserves. We look at even inorganic growth which is a possibility. Right now, we can't comment, but we are looking at some options on that.
Sure. Would that largely be in India or anywhere across the world, sir?
Both, both.
There are no people on the queue. Shall I take the question, sir?
Maybe one last question.
Yes. The final call will be from Mr. [ Zubin ].
Sir, firstly, just wanted to know the -- how the compact tractors in our main market, basically Maharashtra side, the western side because over the last 2 quarters, we've heard that things were not great. So what is the outlook in these states just wanted to know? That's my first question.
The outlook is -- I think Maharashtra is coming back. Of course, from a very dry spell, they went into a very extremely wet spell, so that also dampened things for the -- in July because the farmers were not able to do anything, they had very heavy rains as you may be aware. And now things are settling down, and we are seeing that there will be a fairly significant traction coming back for this segment in Maharashtra.
So secondly, I just wanted to know in terms of our exports for this quarter and what are we expecting? Because I remember in Q4, also, we were looking at targeting U.S., specifically entering into U.S. So what is would -- our current juncture, so where are we on that?
Yes. The U.S. market, we have started work on that. And we have started work on developing the specific products for the U.S. market because U.S. market has different requirements unlike Europe. And we are, I would say, on track to launch the products in U.S. sometime next year.
Also, sir, with respect to Zetor numbers for this year, what are we kind of expecting looking at Q1 as well as your expectation with expansion happening in the distribution side? So any specific or any range of numbers would be helpful with respect to Zetor side?
So [ Zubin ], this question is being asked 2, 3 times. We don't want to give out any numbers as of now. But yes, the product is being accepted good in the market, and we expect this to be better in quarter-on-quarter basis.
Sure, sure. Also lastly, I would like to know. So I think in Q4, we had already spoken about our targets, which got extended buying. So do you expect any change in the time lines with respect to our target of reaching INR 3,000 crores? Also, I remember, Antony, sir, had given how he plans to go about. So he had spoken about the INR 1,000 crores, but the remaining INR 1,000 crore, they had spoken, like I said that we are looking at different avenues. So any movement with respect to that or any information you could provide with respect to that?
Yes. We have been looking at a couple of options. As I said, I think in the last investor's call, Mr. Antony had indicated that we should be looking at about INR 2,000 crores coming from the existing products what we are doing. That is the year '25, '26. And for the other INR 1,000 crores, we are looking at some other growth opportunities. Right now, I'm unable to comment on those because it's not yet burnt up.
Okay, sir. So basically, we are sticking with the time line of FY '25, '26, right, sir?
Yes, I think the INR 2,000 crores at '25, '26 is what has been indicated in the last investor's call.
So on behalf of B&K Securities, we thank all the participants for joining the call. And special thanks to V.S.T. Tillers Management for taking time out for the call, and giving us the opportunity to host the call. Have a good day.
Thank you.
Thank you so much.