On 3rd December 2013, Prashant Jain bought 72,508 shares of VST Tillers at Rs 596 each for the HDFC Prudence Fund.
VST Tillers is a small cap company with a market capitalisation of Rs. 548 crore. It has a fabulous track record of being a multibagger. Over the past 10 years (1.12.2002), the stock has given an incredible 54 times return. In the last 5 years (1.12.2008) VST Tillers has given a return of 8.84 times. In the last one year itself, the stock has given a 57% return.
VST Tillers Tractors has done so well in the past because farm mechanization in India is essential to improve productivity and overcome the farm 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, being an established player in farm equipment segment, is very well placed to cater opportunities in this segment going forward. VST is a debt free company with net cash in balance sheet. VST also has a track record of paying regular dividend and has higher return ratios.
VST is quoting at reasonable valuations. Its’ trailing 12-month (TTM) EPS was Rs 74 per share. In the 6 months ended 30th September 2013, the stock has earned an EPS of Rs. 42 as against Rs. 24 in the 6 months ended 30th September 2012. The price-to-earnings (P/E) ratio, based on the CMP of Rs. 634 and TTM EPS, is 8.56. VST’s price-to-book value is about 2.11 and it offers a dividend yield of about 1.50 percent.
The only downside with VST Tillers Tractors is that it is dependent on the vagaries of the monsoon and the policies of the Government. If the monsoon fails and/ or the Government’s policy is not benign, VST Tillers Tractors’ fortunes get affected.