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V.S.T. Tillers Tractors Ltd – Farm Equipment Specialist with Sequential Recovery Amid Year-on-Year Pressure

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Business Overview

VST Tillers Tractors, founded in 1967, is a renowned manufacturer of agricultural equipment—primarily power tillers, tractors, power reapers, and diesel engines—with manufacturing facilities in Karnataka. It serves both domestic and export markets, and enjoys a leading position in its niche.


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Financial Performance Highlights

Q4 FY25 (March Quarter)
• Revenue was ₹301 crore, up ~35% quarter-on-quarter, but down ~13% year-on-year.
• Operating profit (EBITDA) reached ₹33.98 crore (11.3% margin), exceeding the ₹13 crore in Q3, but below Q4 FY24 levels.
• Net profit improved dramatically sequentially to ₹34.75 crore, though it was down ~13% compared to ₹40 crore in Q4 FY24.
• EPS for the quarter stood at ₹40.20.
 

Q3 FY25 (December Quarter)
• Revenue was ₹219 crore, up nearly 29% year-on-year, but lower than Q2.
• Net profit dropped substantially to ₹1.28 crore due to adverse mark-to-market losses, which skewed quarterly earnings.
 

Annual FY25
• Annual revenue was approximately ₹1,033 crore, marginally up over FY24 (~₹1,028 crore).
• Annual net profit stood at ₹93 crore, down from ₹121 crore in FY24.


Q1 FY26 (June Quarter)
• Revenue improved to ~₹308 crore.
• EBITDA jumped ~62% to ₹63 crore.
• Net profit rose ~81% sequentially to ₹44 crore.
 

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Volume Momentum & Recent Trends
• July 2025 sales grew ~17% year-on-year to 6,471 units, with power tiller volumes up ~18% and tractor sales slightly higher as well.

• Year-to-date (FY26), total volumes have climbed impressively—~50% ahead of the FY25 baseline (19,426 vs 12,925 units).


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Financials & Returns Summary
• Market Cap: Approx ₹4,300–4,400 crore; P/E ~38×
• ROE: ~13.1%, ROCE: ~16.2%, Operating margin: ~12.5%
• Dividend yield: Modest, ~0.4%


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Investment Summary

Strengths:
• Sequential earnings recovery in Q4 FY25 and Q1 FY26 indicate better profitability even as YoY comparables soften.
• Volume acceleration early in FY26 suggests resurgent demand for power tillers and small tractors.
• Strong return metrics (ROE/ROCE) signal operational efficiency in a cyclical sector.

Risks:
• Cyclical volatility remains—earnings heavily influenced by agricultural demand, monsoon patterns, and TRY.
• Marked YoY dips in profit despite recovery signs highlight swings due to MTM adjustments.
• Rich valuation (~38× P/E) leaves little margin for execution missteps or demand softness.

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What to Watch Next
• Continued volume trends—especially of power tillers and tractors across Q2 FY26.
• Margin sustainability, particularly as PTA (Power tiller availability) ramp-up progresses.
• Annual projection for FY26—if sequential growth sustains, valuation may come closer to fair value.

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