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            Punjab Tractors

Punjab Tractors
Higher farm incomes, output yields and a low base pushed up Punjab Tractor’s tractor volumes by 33 per cent year-onyear to 26,621 units for the first nine months of FY09. Low tractor penetration (half of world average) and priority sector lending norms (18 per cent of net assets to be allocated to the agriculture sector) are helping the company push up its tractor count.

The company’s move to hike prices in the December quarter (raw material costs were up 18 per cent year-onyear in Q3 and, 43.6 per cent for 9MFY09) and cost control measures helped it to maintain operating margins at 12.4 per cent. Further, integration with Mahindra & Mahindra, including vendor rationalisation and better working capital management, should help bring down interest and operational costs.

While there is scope for growth, both on the count of the customer’s ability to pay and penetration levels, lower credit availability from financiers looking to cut their NPAs could be a dampener in the near-term. At current levels, the stock has priced in some of the positives. Investors can look at picking it up at lower levels.
source - BS

(updated - Feb 2009)

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