HDFC Securities has 'Buy' tag on this auto stock, sees upside over next 2 quarters

Brokerage house HDFC Securities expects VST Tillers Tractors' revenue/EBITDA/PAT to grow at CAGR of 16/27/18% over FY21 to FY24E on the back of new product launches, increasing exports and continuing import curbs which could drive higher volumes. 

“We believe investors can buy the stock in the band of ₹2,790-2,830 and add on dips to ₹2,510-2,540 band for a base case fair value of ₹3,045 and bull case fair value of ₹3,345 over the next 2 quarters,” HDFC Securities recommended while maintaining its Buy tag on the auto stock.

VST Tillers is debt-free company with healthy cash flows and low capex requirement in the near term. Over the medium term the company has set an ambitious target of being a ₹3,000 crore company by 2025 in diversified farm mechanization products and solutions, the brokerage highlighted.

Rising farm income due to better output and higher MSP bodes well for demand for agricultural implements at a time when availability of labour is becoming scarcer. Better reservoir levels across the country and prediction for normal rains for the current year means better times for kharif and later rabi harvest, it said. 

"Apart from growth ion tillers and tractors segments, it is also banking on expanding the volume and range of precision implements business over time. ICRA projects the tiller market to grow from Rs.1350 cr in FY21 to Rs.3150 cr in FY25," the brokerage note added.

Besides tillers, the company also manufactures and sells compact tractors. It is now shifting its focus on selling higher (36-50) HP tractors and also on exports.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.