VST Tillers Q2FY18 Concall Summary

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Financial Highlights

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  • The Company revenue is Rs.175.5 crores in Q2FY18 as compared to Rs.181.2 crores in Q1 of this year.
  • There is a reduction of Rs.9.35 crores in revenue in Q2 due to the GST impact and reduction in tiller sales
  • The company sold 3,129 tractors in Q2FY18 as against 2,555 numbers in Q1FY18. In Q2FY17, the revenue was Rs.169.60 crores.
  • In Q1FY18, company’s growth was minus 2.4%.
  • The company revenue in six months is 357 crores as against 343 crores in the same period last year, registering a revenue growth of 4.1%.
  • Revenue from tillers and tractors is Rs.200 crores and Rs.163 crores respectively during the first half of 2017-18.
  • For Q1FY18, tiller revenue is Rs.112 crores and tractor revenue is Rs.74.06 crores.
  • Operating profit declined by 1.16% in Q2FY18 compared to the same period last year due to employee cost increase and the selling cost increase.
  • Employee cost and selling cost as apercentage of sales have shown an increase due to deviation in revenues from company’s plan.
  • In H1 of 2017-2018, the operating profit declined by 1.69%.
  • The operating profit in Q2FY18 is 12.1% as against 11.7% in Q1FY18.
  • The company expects an improvement of around 100 basis points in the operating profits.
  • Revenues from power tiller spares and tractor spares are Rs 10.5 crores and Rs. 2.49 crores respectively for Q1FY18.
  • Revenue for the first half of 2017-18 from power tillers spares and tractor spares are Rs.20 crores and Rs.5.55 crores respectively.
  • Revenues from tillers and tractors are Rs.112 crores and Rs.74.06 crores for the Q1FY18.
  • GST rate on the components in tillers is 12%, tractors 18% and for Diesel Engine components is 28%.

Company overview

  • Increase in employee cost and increase in selling and other overheads compared to the same period of last year.
  • Company don’t expect any significant increase in employee cost other than the annual increases
  • The selling expenses may marginally go up whenever company launches anew product that will need to havean exclusive expense for the branding.
  • Co Company gives a 15% discount to dealers on cash-and-carry
  • Company’s investment for localization of components is about 14 crores, which is mainly sheet metal items and other components
  • The company expects that the general selling expenses run rate will remain almost the same
  • The commodity price has been increasing in the first half and has impacted the company, especially the metal cost has gone up by 1%.
  • Company got the price corrections because of the GST impact form the state governments
  • In the last two years, the drought situation has impacted the tiller sales.
  • Monsoon has been norma in 2017 , but due to weak monsoon in southern states there has been a drop in tiller sales
  • In tiller segment the company will be launching a new variant and the pilot lots will be released in January..Pilot lots of improved variant of self -propelled power reaper will be released in December.
  • In tractors, the company is working on new product variants.
  • Capacity Utilization will be about 35% to 40%.

Tillers Business

  • In Q2FY18, the tiller volumes are 5,888 numbers compared to 6,407 number in the same period last year, registering an 8% negative growth
  • The company sold 5,888 numbers of tillers in Q2FY18 compared to 7,119 numbers sold in Q1FY18.
  • The number of tillers sold is 13,007 in first six months’ comparison to 13,707 numbers in the same period last year, leading to a drop of 700 numbers.
  • The tiller volumes for the company is adverse 5% in the first six months, while the industry growth is adverse 7%.
  • Company’s market share in the first six months is 62% compared to 61% in the same period last year
  • Company expects to improve tiller sales in the next fivemonths due to good monsoon and release of subsidy schemes by governmen
  • The company expects to reach somewhere around 27,000 tillers as against 25,500 tillers last year.
  • The highest selling model is the 12 HP power tiller.
  • Industry size for greater than 15 HP power tiller is about 5,000 tillers.
  • 12 HP will contribute to almost 90% of the market.
  • There is no major change in the selling trend of Chinese tillers.
  • The attraction for the marginal farmers in case of tillers is price and amount of subsidy from the government.
  • Chinese player's market share has shrunk and the market share off Kirloskar has increased
  • The competition intensity has increased due to local manufacturers launching their products. Subsidy from the government on power tillers varies from about 40,000 or 50,000 and can go upto 1,00,000
  • GST rate applicable to power tiller and tractor is 12%.
  • Input credit in case of thetiller is Rs. 6,700 per unit and in case of tractor it varies from Rs. 18,000 to Rs. 22,000 per unit.

Tractors Business

  • The company sold 5,684 tractors during first six months this year compared to 4,650 tractors in the same period last year, is up by 1,024 numbers.
  • The tractor volume growth is 22% for the company in the first six months compared to the compact industry growth of 14%
  • In Q2FY18, the tractor volume is 3,129 number compared to 2,502 number last year.In Q1FY18, the growth was 18%.
  • In Q1FY18 company sold 381 number for 27 HP and in Q2FY18 it sold 849 numbers
  • The tractor industry has shown 20.74% growth while company’s growth in the industry is 20.9% in the first six months.
  • Company’s market share in compact segment in first six months is 15.3% compared to 14.5% in the same period last year.

 Agreement with Kukie Machinery

  • The company entered into a technology transfer agreement with Kukje Machinery for the manufacture of 5025R series of Branson brand tractors of 47 HP.
  • This tractor would play in the niche segment competing with some of the well-known manufacturers.
  • The company will manufacture these tractors in a phased manner.
  • In the first batch, the fully imported tractors will be seeded into the market.
  • In phase two, the company will localize most of the components and will be assembling the tractors in India.
  • In phase three, the company will also localize the engine, and at that time the tractor will be fully indigenized.

 DBT Scheme

  • The DBT scheme, as far as tillers are concerned, has been prevalent in Gujarat and Maharashtra, and there is no deterioration there.
  • The company expects better receivables after the launch of full-fledged DBT.
  • This year the DBT was launched in the State of Odisha for the first time.