AEPS. P/BV (Rs.mn) (Rs.mn) (Rs.) (% Chg.)

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1 Stock Review of Techno Funda Research Product Portfolio Track - Buy Portfolio Track Information Data BSE Code Grade FV (Rs.) CMP 52Weeks H/L Kirloskar Pneumatic Co-Ltd D 10 Rs Rs. 563/348 Target Price Reuters Code Bloomberg Code NSE Symbol STOCK DATA Rs.679 KIRP.BO KKPC IN KGKHOSLA Mkt.Cap. Rs mn Shares Outstanding(*) 12.8 mn Avg. Daily Volume (6m) 10,379 Shares Price Performance (%) 1M 3M 6M Days EMA Rs.451 * On fully diluted equity Shares SHARE HOLDING (%) Promoters 55.9 FII 0.4 FI / MF 13.2 Body Corporates 9.1 Public & Others 21.5 Kirloskar Pneumatic is a Kirloskar group company, manufacturing air, gas and refrigeration compressors, compressor systems and gear boxes. It derives 85% of its revenue from the Compressors/compressor system segment and 15% from the transmission products. Strong Order Book Position: KPCL has an order book position of Rs.660 Crs as of June 2010, which is 1.4x its FY10 revenue. This order book is executable over a period of 14-16months thus providing healthy revenue growth visibility. Industry Leader: The company is an industry leader in the hi-tech refrigeration systems having a market share of 70% in ammonia based refrigeration systems. It has ~50% market share in the CNG gas compression systems supplying to industry leaders like IGL, MGL etc. The company s hi-tech screw compressors have a 90% market share in the Indian Navy for compression systems required for air conditioning. In the Railways the company has a 75-80% market share for traction gears in locomotives. CNG Gas and Refrigeration Compressing Systems to drive growth: Business for Gas Compression System for CNG Packages is slated for growth as Government has planned on expanding the City Gas Distribution projects to over 300 cities in India. Currently there are just 700 CNG stations in India which is much lower than more than 2600 CNG stations of Pakistan. Thus KPCL which is an eminent player in the CNG gas Compression systems is likely to benefit from this growth. With the rapid increase in retail malls and departmental stores, the Cold storage and refrigeration segment too provides good growth opportunities. Hi-tech Products: Kirloskar Pneumatic is an engineering company providing highly customized and hitechnology products for its customers which results into lower competition. The company distinguishes itself as a customized system supplier rather than a product manufacturer. It is now focusing more towards hi-tech products which will help the company increase its margins. KPCL is the only company in India manufacturing 1MW gear boxes for wind mills in India, and the only supplier to NEPC and Pioneer. Y/E Mar. REVENUE RPAT AEPS AEPS ROE ROCE P/E P/BV (Rs.mn) (Rs.mn) (Rs.) (% Chg.) (%) (%) (x) (x) FY FY11E FY12E Ishpreet Batra ishpreet.batra@sushilfinance.com This report based on Techno Funda Research and our View / Target Price has been derived accordingly. Please refer to the disclaimer on the last page. 1

2 Kirloskar Pneumatic Company Ltd Compressors/ Compressing Systems Transmission Products Air Compressors Refrigeration Gas Compressors Source: Company Company Profile The Company has two major business segments viz. Compressors/Compressing Systems and Transmission Products. Compressors/Compressing Systems: The Compressing Systems are set-up at Hadapsar and Saswad, both at Pune, manufacturing a wide variety of compressors, and also undertaking design, packaging of conventional and high-tech refrigeration systems. This segment serves various industries such as Power Generation, Air Separation, Textile, Iron and Steel, Oil & Gas, Cement, Sugar, Defence, Railways, Construction & Mining, Fertilizers, Pharmaceuticals, Dairy, Brewery, Fish & Meat Processing, Cold Storage, Ice Plant etc. The plant at Saswad also packages Gas Compression systems for CNG Stations, Refineries and Petrochemical Industry. Transmission Products: The Transmission Products are manufactured at Hadapsar, Pune for Rail Traction Gears, and gearboxes for Wind Turbine, Navy, commercial ships and industrial applications. It is also a supplier of locomotive gears to General Motors and General Electric, being in the approved list of the aforesaid companies. Net debt free with higher return ratios: KPCL is a net debt free company with higher return ratios. The company s ROE as of FY10 is 32.6% while ROCE is 26.9%. The company s profitability margins have seen a steady rise due to conscious management efforts. Its operating profit margin has increased from 9.7% in FY07 to 14.9% of FY10. Rise in margins was mainly because of strict cost control measures and sale of hi-tech products which have higher margins. 2

3 PROFIT & LOSS (Consolidated) (Rs.mn) BALANCE SHEET (Consolidated) (Rs.mn) Y/E March. FY09 FY10 FY11E FY12E Net Sales Raw material Consumption Manufacturing Expenses Staff Cost Total Expenditure PBIDT Interest Depreciation Other Income PBT incl OI Tax RPAT As on 31 st March. FY09 FY10 FY11E FY12E Share Capital Reserves & Surplus Net Worth Secured Loans Unsecured Loans Total Loan funds Deferred Tax Capital Employed Net Block Cap. WIP Investments Sundry Debtors Cash & Bank Bal Loans & Advances Inventory Curr Liab & Prov Net Current Assets Total Assets Source: Company, Sushil Finance Research Estimates 3

4 FINANCIAL RATIOS (Consolidated) Y/E March FY09 FY10 FY11E FY12E Growth (%) Net Sales EBITDA Adjusted Net Profit Profitability (%) EBIDTA Margin (%) Net Profit Margin (%) ROCE (%) ROE (%) Per Share Data (Rs.) EPS (Rs.) CEPS (Rs.) BVPS (Rs) Valuation PER (x) PEG (x) P/BV (x) EV/EBITDA (x) EV/Net Sales (x) Turnover Debtor Days Creditor Days Gearing Ratio D/E Source: Company, Sushil Finance Research Estimates 4

5 Please Note: The objective of this report is to provide fundamental information on stocks covered under our product Portfolio Track. These stocks are likely to witness price up move in medium to long term. Companies are selected based on certain Fundamental / Technical indicators and it may be possible that our view on these stocks may have been formed without meeting the company management. All the data appearing in this report is from sources believed to be reliable but we do not guarantee that it is correct or accurate. Disclaimer: This report is prepared for the exclusive use of Sushil Group clients only and should not be reproduced, re-circulated, published in any media, website or otherwise, in any form or manner, in part or as a whole, without the express consent in writing of Sushil Financial Services Private Limited. Any unauthorized use, disclosure or public dissemination of information contained herein is prohibited. This report is to be used only by the original recipient to whom it is sent. This is for private circulation only and the said document does not constitute an offer to buy or sell any securities mentioned herein. While utmost care has been taken in preparing the above, we claim no responsibility for its accuracy. We shall not be liable for any direct or indirect losses arising from the use thereof and the investors are requested to use the information contained herein at their own risk. This report has been prepared for information purposes only and is not a solicitation, or an offer, to buy or sell any security. It does not purport to be a complete description of the securities, markets or developments referred to in the material. The information, on which the report is based, has been obtained from sources, which we believe to be reliable, but we have not independently verified such information and we do not guarantee that it is accurate or complete. All expressions of opinion are subject to change without notice. Sushil Financial Services Private Limited and its connected companies, and their respective directors, officers and employees (to be collectively known as SFSPL), may, from time to time, have a long or short position in the securities mentioned and may sell or buy such securities. SFSPL may act upon or make use of information contained herein prior to the publication thereof. 5