BSE Code : 531266, CMP 510. Buy in range of 480-510, and hold for 1.5-2 years for handsome gains...
V.S.T Tillers Tractors Ltd is a bangalore based company. It is promoted by the V.S.T Group, in collaboration and joint venture with Mitsubishi Heavy Industries and Mitsubishi Corporation, Japan for the manufacture of Power Tillers and Diesel Engines. The company is into manufacturing of Power Tillers, Engines and Tractors.
As India economy is dominated by Agriculture and still it is have large scope for introducing technology into it. Since population is growing, food prices are also rising slowly. To increase productivity in agriculture sector government is bringing in various schemes and giving subsidies to farmer on use of Tractors and other machinery. The sales of power tillers have been increasing since last couple of years and VST tiller future looking promising as per that.
The Company is a market leader in Power tiller and have 50% market share. Earlier company was producing tiller and tractor on its same Bangalore plant, but seeing the demand of tiller company had started a new facility for tractors and Bangalore plant will be making tiller, so it should post good growth in sales of tiller in coming years..Company is planning to focus on tiller with 65-70% revenues coming from tiller segment.
The company has market capitalization of INR 440 Cr, and trading at FY 12 PE of 9.5 approx. We expect it to command PE of 13-15 in good markets and as its profit grows, one should see re-rating happening in the counter. The company maintains a very good operating profit margin of 17.41% and net profit margin of 10.86%. The company has proved its worth over the years by maintaining Return of Equity of over 33%.
Company is looking good at this valuation and one can look forward to 100%+ returns in next 1.5-2 years in this counter.
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