Millat Tractors (MTL) conducted its corporate briefing session today, during which management discussed the company’s financial performance and outlook as reported by Topline Pakistan Research. Management believes Belarus tractors will be a new addition that will bring healthy competition. This is not their first entry into the market, as they have entered several times before. MTL, however, has a strong market position and does not expect any negative impact.
Government policies and the Green Tractor Scheme have led to lower sales, as many farmers wait for the announcement of the scheme and the balloting process. The government’s plan to extend this opportunity into FY26 is also impacting demand for normal market sales. The company believes tractor schemes are not an effective way to sustainably grow the tractor market, as they increase dependence on subsidized orders while suppressing regular demand.
Deliveries under the Green Tractor Scheme have begun, reflected in the 2k units sales jump in October 2025. However, as per management, there are payment delays. The delivery timelines have now stretched under the scheme, considering the delayed payments.
MTL has maintained its market share in the Green Tractor Scheme.
Management believes that due to low crop prices and the weak financial position of farmers, a continuous MoM increase in sales is difficult. The recent uptick is primarily driven by the Green Tractor Scheme, which is expected to continue for a few months. The tractor market has just experienced its worst year in two decades, primarily due to weak farm economics. However, management expects this downturn to end.
MTL is exploring foreign markets, entering new destinations such as Mexico, where demand is strong, to grow its exports amid stagnating domestic tractor demand. Exports to Afghanistan were previously high, but with recent tensions between Pakistan and Afghanistan, the company expects a dip. However, it believes Mexico and other new markets will offset this decline.
MTL has sales tax refund claims of Rs 7.59 billion as of June 30, 2025, out of which Rs 1.3 billion relate to FY25.
MTL has the highest localization level in the country. The local/imported components ratio stands at 92% and 8%, respectively, overall. This ratio is 95% local and 5% imported for low HP tractors and 90% regional and 10% imported for high HP tractors. Imported components largely relate to technologically advanced parts such as fuel pumps and 4WD kits that must be sourced internationally due to local technological limitations and high CAPEX requirements.
We maintain our SELL call on MTL as the company trades at FY26E/27F PE of 18.1x/12.5x.
