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Thursday, July 29, 2010

VST Tillers Tractors Ltd:-Buy/sell/hold,growth prospects and recomendation,news and results,target price and analysis,views and outlook

VST Tillers Tractors Ltd was recommended at 101rs an year odd ago.From their it went on to hit a high of 590rs(885rs after adjusting 1 free bonus shares for every 2 shares held) providing a staggering 884% return.Check the link if you missed the previous story:-

Scripscan:VST Tillers Tractors Ltd

Introduction-Incorporated in late 1960s, VSTTL was promoted as a Joint Venture by V.T. Velu with Mitsubishi Heavy Industries for manufacturing Power Tillers, Tractors and Diesel Engines.VST is leading manufacturer of Tillers in India. It makes Yanji Shakti Rice Transplanter, VST Shakti Power Tiller. For Tractor, it commands niche market share in Maharashtra and Gujarat in the smallest H.P. range.Majority of the sales comes from tiller divisons and the rest from tractor one.Company has Precision Components Division at Mysore.However,Division is not doing well due to lack of orders as this is not core business of the company.

Outlook-Growth of Tiller and Tractor Industries is directly linked to the GDP growth which is expected to be 7% in current year. Easier credit availability to farmers and awareness of the benefits from mechanisation provides opportunities for higher sales. Govt's policy on agriculture and introduction of Bharat Nirman Programme for growing massive rural infrastructure will directly benefit VSTTL.In view of good demand, company is going for expansion to capitalise for the boom.

Huge land bank:VST tillers Plant is situated on 20 acre land at Whitefield, Bangalore.Presently, hardly 8-9 acre land is used and nearly 11-12 acre land is surplus/idle. Whitefield has become a major commercial area in Bangaore, extremely crowded and hardly any manufacturing facilities left in this area. Due to heavy congestion (which prevents movement of this goods during peak hours), VSTTL faces many difficulties at its present site. Sooner or later,(within 1-2 years), management will have to take a decision to relocate its Plant around 30 kms. away from existing site. Present market value of this land is more than Rs. 250 crs. which works out to around 440rs/- per share. This value will increase significantly in next 1-2 years (when management decides to relocate).

Conclusion-VSTTL is in a position to report EPS of 40 in current year.Stock is trading at just 2.5x FY09E EPS which is lowest in the Industry. P.E. Ratio of Agriculture/OEM Companies range from 8-12 times.Considering Mitsubishi collaboration and clean promoters, VST deserves valuations at par with the best in the Industry.The scrip looks very interesting and there can be huge returns if one stays invested in the scrip for a medium to long term horizion.

Latest update:Vst is in a momentum now may hit higher levels.Enjoy the 9 bagger folks.

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