Millat Tractors slated for 18% downside as analyst downgrades to SELL

September 26, 2025 (MLN): According to Topline Securities, Millat Tractors (MTL) has a December 2026 target price of Rs425 per share, based on a Discounted Cash Flow (DCF) valuation. The current market price of MTL is approximately Rs563.

This target price implies a potential total downside of 18% when considering the projected 6% dividend yield. The firm has downgraded the stock to a "SELL" recommendation from a previous "HOLD" stance.

The bearish outlook is primarily driven by expectations of subdued tractor sales, despite government initiatives.

Historical data indicates that floods significantly weaken farmers’ purchasing power, typically leading to weak post-flood sales, a trend Topline Securities expects to continue, keeping tractor demand soft.

A DCF-based valuation of MTL’s core operations points to Rs379 per share, while other businesses, valued using a market multiple/Book Value (BV) approach, add roughly Rs46 per share, bringing the total target to Rs425.

Topline Securities estimates the company’s earnings per share (EPS) at Rs29 in FY26E and Rs43 in FY27F. While a 20,000-unit tractor scheme by the Punjab government is expected to boost industry sales by 16% to around 34,000 units in FY26E, this figure remains 53% below the FY10 peak.

After adjusting for the scheme, overall tractor sales are projected to decline by approximately 30% to roughly 14,000 units in FY26, with MTL retaining a dominant market share of 60–65%.

Key risks that could offset the "SELL" recommendation include faster-than-expected implementation or larger-than-anticipated scope of government tractor schemes, Millat Tractors achieving a higher market share in these schemes, and a favorable Pakistani Rupee (PKR) exchange rate.

Laterally, a starkly different outlook has been provided by Taurus Securities Limited, which argues that MTL is "well-positioned to offer an upside potential of 14%," setting a higher target price of Rs650/share by December 2025.

This optimistic view is driven by the anticipated pickup in demand and earnings, significantly bolstered by the Punjab Government's recently launched Phase-II of the Green Tractor Scheme.

The brokerage highlights that under Phase-II, 20,000 tractors are slated for distribution split evenly between 50–65HP models with a Rs500,000 subsidy and 75–125HP models with a Rs1 million subsidy. Given MTL's dominant 64% market share and product line alignment, the company is expected to capture a significant portion of this demand.

Taurus Securities believes Phase-II could add 8,000–10,000 extra units to MTL’s FY26 sales, potentially contributing Rs14-17/share to earnings.

Deliveries are expected to commence in 2QFY26, following the August 2025 application opening, setting the stage for robust growth.

The firm's optimism is further supported by improving farm economics through broader incentives like the Kissan Card and the enhanced Rs123bn budget allocation for agriculture in Punjab for FY26.

It is noted that the preceding Phase-I scheme had already delivered a significant boost, helping MTL end FY25 with 18,580 units, well exceeding the earlier estimate of 14,500.

While the company reported a 43% year-on-year revenue decline to Rs40bn in 9MFY25 due to soft farm economics and higher finance costs, the Phase-I rollout in Nov–Dec 2024 helped stabilize volumes and provided some relief to profitability during a challenging year.

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