Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VST Tillers Tractors Ltd (BOM:531266, Financial) reported a 5% increase in power tiller sales in Q2 compared to the same quarter last year.
- The company achieved a revenue of 283 crore in the current quarter, slightly up from 278 crore in the same quarter last year.
- Operational EBITDA for the quarter stood at 13.33%, indicating a strong operational performance.
- The company is expanding its presence in Europe with new product launches, including a stage five HP tractor.
- VST Tillers Tractors Ltd is focusing on entering the US market with a new platform, planning to launch 16 variants in the compact tractor space over the next 2 to 3 years.
Negative Points
- The company's receivables have increased to 70 days due to government orders, which may impact cash flow.
- There is a concern about potential margin pressure due to the introduction of new products and higher horsepower volumes.
- The company is facing challenges in accelerating execution and consolidating new dealerships, particularly in northern markets.
- The JV project with Kobashi is currently on hold, delaying potential growth opportunities.
- There is a risk of commodity price fluctuations affecting the bottom line, especially if geopolitical tensions escalate.
Q & A Highlights
Q: Can you update us on the initiatives taken for the tractor segment and the progress towards achieving growth targets?
A: Nitin Agrawal, CFO, explained that VST Tillers Tractors has launched higher power tractors and is consolidating its presence in Europe with new product launches. The company is also entering the US market with a new platform of compact tractors. In the northern markets of India, 56 dealers have been appointed, and the company plans to consolidate and expand further.
Q: What is the expectation for dealer profitability with your products?
A: Nitin Agrawal stated that dealers become profitable at around 30 to 40 units per annum. Currently, there are 56 to 60 dealers, and the company aims to consolidate this number to ensure dealer profitability before scaling up further.
Q: Why have receivables increased to 70 days, and payables reduced?
A: The increase in receivables is due to government orders and is expected to normalize by the end of Q3. The reduction in payables is a result of timely payments, especially to MSMEs, and not due to any specific management strategy.
Q: What are the growth expectations for the small farm machine segment?
A: Nitin Agrawal mentioned a minimum growth target of 20% for the small farm machine segment, including power tillers, power weeders, and power reapers. The power weeder segment is expected to grow rapidly, and the company plans to manufacture power weeders in India.
Q: How is the company addressing the competitive nature of the industry?
A: The focus is on providing a reliable product and ensuring dealer profitability. The company believes that a strong dealership network can convert into brand success, as product differentiation is minimal in the segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
