VST Tillers: Import curb – level playing field

Share price of VST Tillers & Tractors zoomed 12.5% to Rs 1,461.10 on NSE, seemingly reaping the benefits of the government decision to place imports of power tillers and components in restricted list.

While placing stringent restrictions the government allowed imports only through Licence and, further, for only 10% of firms FY19 imports. Only manufacturers to be eligible for applying for import licence for Power Tillers.

Also, the government mandated need for proper infrastructure for post sales service & spare parts for power tiller importers.

Meanwhile, VST reported a dismal Q4FY20 performance. The company reported negative EBITDA margin to the tune of 5.4% with consequent loss of Rs 3.4 crore at the PAT level in Q4FY20.

Power tiller sales volume in Q4FY20 was at 4917 units, down 32% YoY while tractor sales volume was at 1470 units, down 31% YoY. Sales in value terms for Q4FY20 came in at Rs 120 crore, down 33% YoY.

For full year FY20, net sales were at Rs 544 crore with EBITDA at Rs 17.3 crore and PAT at Rs 18 crore (EPS Rs. 20.8).

VST’s stock witnessed a sharp up move from early April 2020 lows with key positives on China dependency shift and regaining of higher margin trajectory and now trades at 19x P/E on FY22E

Though, the current valuations leave little room for upgrade, but the import restrictions on power tilers would turn the underlying fundamental scenario.

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