Farm mechanization in India is essential to improve productivity and overcome the labor shortage issue. The government’s subsidy encourages farmers to buy farm equipment and drives overall demand for Power Tillers and low HP Tractors amongst others. VST Tillers Tractors, being an established player in farm equipment segment, is very well placed to grow at decent rate for next 2-3 years. Based on its FY11 performance & business growth outlook, we expect VST Tillers Tractors’s Net Revenues to grow by 22.6% & 20.4% to in FY12E & FY13E, respectively. At the CMP of Rs.475, VST Tillers Tractors’s valuation looks very attractive at 7.7x & 6.4x its FY12E & FY13E EPS of Rs.61.7 & Rs.74 respectively. We initiate our coverage on VST Tillers Tractors with a Buy rating & target price of Rs.592 (8x FY13E EPS)
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