Topline Securities organised the Pakistan Mid Cap Conference 2025. The second session of Day 3 focused on Millat Tractors (MTL), with Mr. Sohail Nisar, CFO of MTL, serving as the key speaker.
Under the Punjab Kissan Card Scheme, it is expected that 20,000 tractors will be distributed in FY26. With MTL holding a 60% market share, the company is optimistic about securing a similar share from this allocation.
MTL is currently experiencing a decline in sales due to weaker farm economics. There is a noticeable shift in demand toward lower-horsepower (HP) tractors, driven by cash flow constraints, as farmers opt for more affordable models.
Next year, growth in the tractor industry is likely to remain subdued, particularly due to the absence of support prices for key crops, which typically help stabilise farm income.
Hyundai Nishat Motors (HNM) is currently profitable; however, the company operated at a loss until last year. HNM has also announced a small dividend for its shareholders.
MTL may be affected by the changes proposed in the Finance Bill 2025. While a reduction in customs duty is expected to benefit the company by 1-2%, this advantage could be negated by an increased cost burden resulting from the government’s upward revision in the minimum wage. The company has approached the government to propose a tractor policy aimed at developing a broader strategy in line with neighbouring countries that produce 150,000 to 170,000 tractors per month.
Sales tax refunds have risen from Rs 8.2 billion, as reported in March 2025, due to lower sales over the previous three months. While the long-standing refund issue of Rs 6 billion is anticipated to be resolved, the remaining amount will be adjustable against future sales. Though sales tax accumulation continues, it remains outside the refund regime and is therefore manageable within the normal course of business.
MTL recorded Rs 4 billion in exports in FY24. The company is now focusing more on exports to mitigate seasonal fluctuations in sales that occur every 2-3 years, aiming to achieve positive margins through international sales.
MTL assembles Massey Ferguson (MF) brand tractors for both local and export markets, with a range of models from 50 to 85 HP. The company has also introduced deluxe variants of existing models, with the MF 385 being the top-selling tractor, according to management.
To meet spare parts requirements, MTL operates a separate business unit for components such as lubricants, batteries, filters, grease, paint, and sheet metal. As a result, 92% of the materials used in MTL tractors are locally sourced, with only 8% being imported.
The Green Tractor Scheme and Kissan Card Scheme, initiated by the Punjab government, are expected to support farm mechanisation. A proposed budget allocates Rs 5.5 billion for small HP tractors and Rs 10 billion for high HP tractors, aiming to distribute 20,000 units.
Courtesy – Topline Securities
