Summary of First Tractor (0038.HK) Conference Call Company Overview - **Company**: First Tractor (0038.HK) - **Industry**: Agricultural Equipment Manufacturing Key Points Production Data - The National Bureau of Statistics (NBS) reported that high-horsepower (HHP) tractor production increased by approximately 10% year-over-year (yoy) in the first two months of 2026, while medium-to-high horsepower tractors saw a 2% yoy increase [1][5] - HHP tractor production has maintained double-digit growth since November 2025, and medium-to-high HP tractors have shown positive growth since July 2025 [1][5] Demand Drivers - The growth in tractor production is seen as evidence of a domestic cycle inflection, with domestic HHP tractor production growing by about 7% yoy after excluding strong export figures (which increased by 48% yoy) [5] - Crop prices have risen by an average of 6% year-to-date entering 2026, which is expected to release pent-up replacement demand for tractors [5] Investment Thesis - First Tractor is positioned as a core beneficiary of the cyclical recovery in the tractor market, with historical data showing a close correlation between the company's share price and tractor production volume [5][12] - The company is expected to benefit from structural trends towards upsizing (high-HP tractors) and upgrading (intelligent tractors) as China modernizes its agriculture sector [12] - Exports present a significant growth opportunity, estimated at approximately US$10 billion, which is three times the total addressable market (TAM) in emerging markets compared to the domestic market [12] Financial Projections - The target price for First Tractor's H-share is set at HK$14.00, representing a 61.1% upside from the current price of HK$8.69 [17] - The target price for the A-share is set at Rmb21.00, with a 59.5% upside from the current price of Rmb13.17 [17] - Revenue projections for 2024 estimate Rmb11.9 billion, with expected growth to Rmb15.3 billion by 2027 [17] Risks - Key downside risks include weaker-than-expected crop prices, unfavorable government subsidy changes, increased market competition, execution risks related to product mix upgrades, slower localization of key components, and slower overseas market expansion [16] Conclusion - The sustained strength in tractor production and favorable crop prices support a positive outlook for First Tractor, reinforcing the recommendation to buy both A-share and H-share [5][14]

Core Insights - Zacks Premium provides tools for investors to enhance their stock market strategies, including daily updates, research reports, and stock screens [1] Zacks Style Scores - Zacks Style Scores are indicators that help investors select stocks likely to outperform the market in the next 30 days, rated from A to F based on value, growth, and momentum [2] Value Score - The Value Style Score identifies attractive and discounted stocks using ratios like P/E, PEG, Price/Sales, and Price/Cash Flow [3] Growth Score - The Growth Style Score focuses on a company's financial strength and future outlook, analyzing projected and historical earnings, sales, and cash flow [4] Momentum Score - The Momentum Style Score helps investors capitalize on price trends, using factors like one-week price changes and monthly earnings estimate changes [5] VGM Score - The VGM Score combines all three Style Scores, providing a comprehensive indicator for selecting stocks with the best value, growth, and momentum [6] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to assist investors in building successful portfolios [7] - Stocks rated 1 (Strong Buy) have produced an average annual return of +23.86% since 1988, significantly outperforming the S&P 500 [8] Stock Selection Strategy - Investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B to maximize potential success [9] - Stocks with lower ranks, even if they have good Style Scores, may still face declining earnings forecasts, increasing the risk of price drops [10] Company Spotlight: AGCO Corporation - AGCO Corporation, established in 1990 and headquartered in Duluth, GA, is a leading manufacturer of agricultural equipment, with a diverse product line sold in 140 countries [11] - The company generated 57% of its 2020 sales from tractors, with other products including combines, application equipment, and replacement parts [11] - AGCO holds a Zacks Rank of 3 (Hold) and has a VGM Score of A, with a Value Style Score of A due to a forward P/E ratio of 21.13 [12] - Recent earnings estimates for fiscal 2026 have been revised higher, with the Zacks Consensus Estimate increasing to $5.78 per share, and an average earnings surprise of +329.6% [12] - With strong rankings and Style Scores, AGCO is recommended for investors' consideration [13]

Core Insights - Deere & Co. shares have surged over 40% since the beginning of the year, reaching a new high after reporting earnings that exceeded analysts' expectations [1][1][1] Financial Performance - Deere reported earnings per share of $2.42 and revenue of $9.61 billion, reflecting a 13% year-over-year increase [1][1][1] - The company expects net income for the full year to be between $4.5 billion and $5 billion, an increase from the previous range of $4 billion to $4.75 billion [1][1][1] Market Drivers - The positive results were attributed to increased infrastructure spending and investments in AI data centers [1][1][1] - CEO John May noted a recovery in demand within the construction and small agriculture segments, despite ongoing challenges in the global large agriculture industry [1][1][1] Future Outlook - Deere anticipates that 2023 could mark the bottom of the current cycle, with expectations for stronger sales growth in 2027 and beyond [1][1][1] - Sales from the Production & Precision Agriculture segment are projected to decline by 5% to 10%, while small agriculture and construction sales are expected to rise by approximately 15% [1][1][1]

Core Viewpoint - The company believes that fiscal 2026 represents the bottom of the current cycle, with signs of stabilization in North American large agriculture and strong growth in construction markets [1] Performance Highlights - The performance beat was mainly driven by higher-than-expected shipment volumes and operational efficiencies, which offset significant incremental tariff expenses of approximately $1.2 billion [1] - Strategic underproduction in fiscal 2025 effectively cleared the trade ladder, resulting in a decline of over 40% in late-model used tractor inventory from its 2025 peak, thus facilitating new machine replacement demand [1] Sector Performance - The Construction & Forestry segment outperformed due to resilient infrastructure spending, growth in data centers, and a 50% sequential increase in order banks, providing visibility through year-end [1] - The Small Ag & Turf segment experienced a growth of 24%, reflecting a normalization in the turf sector and strong demand from dairy and livestock producers, supported by robust beef prices [1] - South American performance is under pressure from high interest rates and currency volatility, leading to proactive production cuts in Brazilian combines to manage field inventory [1] Strategic Initiatives - The acquisition of Tenna aligns with a 'machine, task, and job site' strategy, moving beyond hardware to offer brand-agnostic digital fleet optimization for contractors [1]

Core Viewpoint - Deere's stock is on track for its eighth record this year, driven by strong earnings and a positive sales growth outlook for 2026, particularly in its construction business [1] Earnings Results - Deere's fiscal first-quarter earnings exceeded expectations, with profits in its construction business more than doubling [1] - The company provided a 2026 sales growth outlook indicating that all business segments are expected to outperform their respective industries [1] Business Segment Performance - Despite challenges in the global large-agriculture business due to tariffs and increased warranty expenses, Deere's overall performance remains strong [1]

Core Insights - Deere reported a decline in first-quarter profit, primarily affected by tariffs and reduced demand for tractors [1] Company Performance - The company's profit for the first quarter was lower compared to previous periods, indicating challenges in maintaining profitability [1] - Tariffs imposed on imports have negatively impacted the company's financial performance [1] - There is a noticeable weakness in tractor demand, which has further contributed to the decline in profits [1]

Q4 2025 FINANCIAL RESULTS February 17, 2026 SAFE HARBOR STATEMENT AND DISCLOSURES All statements other than statements of historical fact contained in this presentation including competitive strengths; business strategy; future financial position or operating results; budgets; projections with respect to revenue, income, earnings (or loss) per share, capital expenditures, dividends, liquidity, capital structure or other financial items; costs; and plans and objectives of management regarding operations and ...

Core Insights - The India-US interim trade deal presents a significant opportunity for Escorts Kubota to explore exporting tractors to the US market [1][2] - Kubota Corporation aims to leverage India as a growth engine and a global hub for R&D, procurement, and production under its mid-term business plan for 2030 [1][5] Company Insights - Escorts Kubota is currently not exporting to the US but sees potential due to the new tariff situation, which may allow for competitive pricing compared to Japanese exports [2][3] - The company is considering manufacturing tractors in India to enhance export opportunities, which would benefit the parent company [5] Industry Insights - The tractor industry in India is expected to experience significant growth, with a projected increase of 30-35% in the March quarter following a 23% growth in the previous quarter due to GST rate reductions [6][7] - In the quarter ended December 2025, Escorts Kubota reported tractor volumes of 36,955 units, reflecting a 13.5% increase from the same quarter in the previous fiscal year [7]

Core Insights - Kubota Corporation aims to transform India into its growth engine as part of its mid-term business plan for 2030, focusing on business and projects from India as a key strategy aspect [1][5] - The India-US interim trade deal presents an opportunity for Escorts Kubota to explore exporting tractors to the US market, which is currently not being tapped [1][2] - The company is currently exporting from Japan, facing a 15% tariff, while the tariff for India stands at 18%, indicating a potential for competitive advantage if production shifts to India [2] Group 1: Business Strategy - Kubota plans to leverage India as a global hub for R&D, procurement, and production, aiming to enhance cost competitiveness and strengthen its supply chain [5] - The company sees the possibility of manufacturing tractors in India for export, which would be beneficial for the parent company [5] Group 2: Market Outlook - The tractor industry in India is expected to grow significantly, with a 23% increase recorded in the third quarter following a GST rate reduction [6] - Projections indicate that the industry could grow by approximately 30-35% in the March quarter, with momentum expected to continue through July-August before a high base effect impacts growth [7] - In the quarter ending December 2025, Escorts Kubota reported tractor volumes of 36,955 units, reflecting a 13.5% increase from 32,556 units in the same quarter of the previous fiscal year [7]

Group 1: India-US Trade Deal Impact - The India-US interim trade deal presents an opportunity for Escorts Kubota to explore exporting tractors to the US market [1][2] - Currently, the company is not exporting to the US, but the new tariff situation may facilitate market entry [2] - The parent company, Kubota Corporation, is currently exporting from Japan, facing a 15% tariff, which is comparable to India's 18% tariff [3] Group 2: Kubota's Strategic Plans - Kubota Corporation aims to make India a growth engine under its mid-term business plan for 2030, focusing on R&D, procurement, and production [4] - The strategy includes leveraging India to enhance cost competitiveness and strengthen the supply chain [4] Group 3: EU Trade Relations and Domestic Market Outlook - The tariff on tractors for the India-EU Free Trade Agreement (FTA) is already zero, and no major impact on the tractor business is expected [5] - The tractor industry in India is projected to grow significantly, with a 23% increase in the third quarter following GST rate reductions [5] - For the March quarter, industry growth is anticipated to be around 30-35%, with momentum expected to continue into mid-year [6] - In the quarter ending December 2025, Escorts Kubota reported tractor volumes of 36,955 units, a 13.5% increase from the previous year [6]