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Key Takeaways
Fourth-largest tractor manufacturer in India
International Tractors is the fourth largest tractor manufacturer in India. It provides a
complete product line, including tractors, multi-utility vehicles, engines, farm machinery
attachments, diesel gensets, auto components, and pick & carry cranes. It has tractor
manufacturing facilities in Punjab, with total capacity of 70,000 units. Majority of its
tractor exports are to North African and SAARC countries.
Expects 18-20% CAGR (FY11-15) for the industry
The management expects the size of the Indian tractor industry to reach 0.54m
units by FY12 (~13% growth) and ~1m units by FY15 (CAGR of 18-20%), driven by:
Global food shortage driving up crop yields and prices
Low tractor penetration levels (especially in the southern region)
Government support by higher allocation of expenditure to agriculture
Higher non-farm income (NREGA, etc)
Rising labor cost and lower availability of labor
Increasing access to finance through banks and NBFCs
Emergence of corporate farming
Regionally broad-based growth, with West and East growing rapidly (over 50%), as
against higher dependence on the northern states, earlier.
40-50HP segment is gaining traction, driven by additional non-farm applications.
Capacity expansion endorses robust growth estimates
The company will be investing INR2.5b over 2-3 years for capacity expansion from
45,000 units in FY11 to 120,000 units in FY14.
It is looking at ~28% volume CAGR (FY11-15) to ~120,000 units and aspires to gain
15% market share in the domestic markets (from 8% currently).
While it is very strong in higher HP tractors, International Tractors plans to launch
an 18HP tractor focused on export markets as well as the domestic market.
The management anticipates strong growth in the exports market and expects exports
to grow at 38% CAGR over FY11-15 to 25,000 units.
The company has strong presence in the North and West (Punjab, Haryana, Western
UP, Gujarat, Chhattisgarh). It is now expanding in the East and the South. It is
doubling its presence in the southern region by adding dealers. It plans to add ~105
dealers across the country, taking total dealers to 817.
EBITDA margin to improve from FY11 levels
It enjoys above industry average EBITDA margin at ~20%, despite offering better
dealer margins. Higher margins are a result of (a) better product mix, with larger
contribution from higher HP tractors, (b) higher operating leverage, (c) focus on
cost reduction and value engineering initiatives, (d) higher volumes from tax-free
zone, and (e) retention of partial benefit due to lowering of excise duty on components.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Fourth-largest tractor manufacturer in India
International Tractors is the fourth largest tractor manufacturer in India. It provides a
complete product line, including tractors, multi-utility vehicles, engines, farm machinery
attachments, diesel gensets, auto components, and pick & carry cranes. It has tractor
manufacturing facilities in Punjab, with total capacity of 70,000 units. Majority of its
tractor exports are to North African and SAARC countries.
Expects 18-20% CAGR (FY11-15) for the industry
The management expects the size of the Indian tractor industry to reach 0.54m
units by FY12 (~13% growth) and ~1m units by FY15 (CAGR of 18-20%), driven by:
Global food shortage driving up crop yields and prices
Low tractor penetration levels (especially in the southern region)
Government support by higher allocation of expenditure to agriculture
Higher non-farm income (NREGA, etc)
Rising labor cost and lower availability of labor
Increasing access to finance through banks and NBFCs
Emergence of corporate farming
Regionally broad-based growth, with West and East growing rapidly (over 50%), as
against higher dependence on the northern states, earlier.
40-50HP segment is gaining traction, driven by additional non-farm applications.
Capacity expansion endorses robust growth estimates
The company will be investing INR2.5b over 2-3 years for capacity expansion from
45,000 units in FY11 to 120,000 units in FY14.
It is looking at ~28% volume CAGR (FY11-15) to ~120,000 units and aspires to gain
15% market share in the domestic markets (from 8% currently).
While it is very strong in higher HP tractors, International Tractors plans to launch
an 18HP tractor focused on export markets as well as the domestic market.
The management anticipates strong growth in the exports market and expects exports
to grow at 38% CAGR over FY11-15 to 25,000 units.
The company has strong presence in the North and West (Punjab, Haryana, Western
UP, Gujarat, Chhattisgarh). It is now expanding in the East and the South. It is
doubling its presence in the southern region by adding dealers. It plans to add ~105
dealers across the country, taking total dealers to 817.
EBITDA margin to improve from FY11 levels
It enjoys above industry average EBITDA margin at ~20%, despite offering better
dealer margins. Higher margins are a result of (a) better product mix, with larger
contribution from higher HP tractors, (b) higher operating leverage, (c) focus on
cost reduction and value engineering initiatives, (d) higher volumes from tax-free
zone, and (e) retention of partial benefit due to lowering of excise duty on components.
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