Buy VST Tillers; target of Rs 2250: Motilal Oswal

Motilal Oswal research report on VST Tillers Tractors

VST Tillers Tractors was incorporated in 1967 as a joint venture (JV) between VST Group, Mitsubishi Heavy Industries and Mitsubishi Corporation, Japan. VST is a leading manufacturer of power tillers and tractors in sub-compact segments (below 30hp). It currently has capacity for making 60,000 power tillers at its facility in Bengaluru and 36,000 sub-compact tractors at its plant in Hosur, Tamil Nadu.

Valuations & View: VST is an attractive play on its debt-free status, healthy product pipeline, continuous emphasis on market-share increase, minimal capex requirements, healthy FCF, and superior return ratios, and resurgence of agriculture income on the back of above normal monsoon forecasts. We expect VST to clock sales, PAT CAGR of 13.8% & 17.3% respectively in FY16-18E. We initiate coverage with 'BUY' recommendation and target price of INR 2,250, assigning PE of 19x on FY18E EPS (upside of 20%).