BUY CMP 228.50 Target Price 263.00 SHAKTI PUMPS (INDIA) LTD Result Update (PARENT BASIS): Q3 FY15 JANUARY 27 th 2015 ISIN: INE908D01010 Index Details Stock Data Sector Industrial Machinery BSE Code 531431 Face Value 10.00 52wk. High / Low (Rs.) 279.80/65.90 Volume (2wk. Avg. Q.) 93000 Market Cap (Rs. in mn.) 3654.63 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A FY15E FY16E Net Sales 3067.42 3149.68 3414.26 EBITDA 550.52 606.01 672.61 Net Profit 265.14 288.18 318.37 EPS 17.39 18.02 19.91 P/E 13.14 12.68 11.48 Shareholding Pattern (%) 1 Year Comparative Graph SHAKTI PUMPS (INDIA) LTD BSE SENSEX SYNOPSIS Shakti Pumps Ltd India s is the largest Manufacturer of Submersible pumps & motors with wide range of innovative pumping solutions & Systems. In Q3 FY15, Net profit was Rs. 76.50 million, an increased by 19.49% compared to Rs.64.02 million in the corresponding period of the previous year. During Q3 FY15, net sales registered 5.54% increase and stood at Rs. 852.33 million from Rs. 807.59 million over the corresponding quarter of previous year. In Q3 FY15, EBIDTA is Rs. 157.70 million and increased by 16.02% as against Rs. 135.93 million in the corresponding period of the previous year. The company has reported an EPS of Rs. 4.78 for the 3 rd quarter as against an EPS of Rs. 4.20 in the corresponding quarter of the previous year. During the quarter, PBT grew by 11.41% of Rs. 95.62 million as against Rs. 85.83 million in the corresponding quarter of the previous year. The Company has signed a MOU with Ratnakar Bank Limited (RBL) under which the Company s customers, primarily the farmers will be able to secure credit facilities for buying Solar Pump sets, PVC pipes and drip irrigation products and host of products across the bank s network. Shakti Pumps Ltd has been awarded for Corporate Excellence at the National Conclave Make in India under the category of Excellence in the Field of Industry. Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 20% over 2013 to 2016E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Shakti Pumps (India) Ltd 228.50 3654.63 17.39 13.14 2.62 20.00 WPIL Ltd 605.50 5914.00 19.19 31.55 5.84 20.00 Kabra Extrusion Technik Ltd 95.10 3033.90 5.04 18.87 2.36 30.00 Eimco Elecon (India) Ltd 445.60 2570.40 30.82 14.46 1.37 40.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q3 FY15, Shakti Pumps Ltd provides energy conservative stainless steel pumping solutions, which consumes less energy and provide more output. The company has reported its financial results for the quarter ended 31 st Dec, 2014. Months Dec-14 Dec-13 % Change Net Sales 852.33 807.59 5.54 PAT 76.50 64.02 19.49 EPS 4.78 4.20 13.89 EBITDA 157.70 135.93 16.02 The company net profit jumps to Rs. 76.50 million from Rs. 64.02 million in the corresponding quarter ending of previous year, an increase of 19.49% y-o-y. The company s net sales was Rs. 852.33 million, an increased by 5.54% for the 3 rd quarter of the financial year 2015 as against Rs. 807.59 million in the corresponding quarter of the previous year. Reported earnings per share of the company stood at Rs 4.78 a share during the quarter as against Rs. 4.20 over previous year period. Profit before interest, depreciation and tax is Rs. 157.70 million as against Rs. 135.93 million in the corresponding period of the previous year. Break up of Expenditure Break up of Expenditure (Values in million) Q3 FY15 Q3 FY14 Consumption of Raw Material 377.89 341.54 Employee Cost 84.45 64.53 Depreciation 27.28 17.43 Other Expenditure 228.02 267.71 Result Updates The Company has signed a Memorandum of Understanding (MoU) with Ratnakar Bank Limited (RBL) under which the Company s customers, primarily the farmers will be able to secure credit facilities for buying Solar Pump sets, PVC pipes and drip irrigation products and host of products across the bank s network.
Shakti Pumps Ltd has been awarded for Corporate Excellence at the National Conclave Make in India under the category of Excellence in the Field of Industry. The award was handed over by Honourable Union Minister of Home Affairs. The company is proud to be honored with "Special Contribution Award by EEPC" (Engineering Export Promotion Council, under ECGC, Government of India) in Large Enterprise Category - Product Group - "Highest Exporter in Thrust Markets for Thrust Products". It is indeed a recognition for company's contribution to exports business thereby saving huge amount of foreign exchange for the country which instills pride in all. COMPANY PROFILE Shakti Pumps (India) Ltd started in the year 1982 a restless urge to grow and a determination that was as strong as steel to be recognized as one of the most renowned names in the manufacture of stainless steel submersible pumps. Shakti is among the few pioneers in the world to produce 100% stainless steel submersible pumps and motors. It is rubbing its shoulders with best brands in the world thanks to the state-of-the art technology and innovation as its hallmarks. The main focus of the company is to manufacture best quality pumps which consume less energy, have long life and are easy to maintain. Considering energy efficiency features of pumps, Bureau of Energy Efficiency (BEE) has granted us 5-star ratings to more than 260 of pump models. The fineness in quality coupled with energy efficiency is the key that differentiates us from others to maintain leadership in global pump industry. Manufacturing The company become a public limited company in the year 1995, is one of the few Indian companies catering to the international markets. Today brand, Shakti, is a force to reckon with. Owing success to strong product lines and technology that is at par with the best in international markets, Shakti Pumps (I) Ltd. has carved a niche amongst quality conscious users around the globe. An ISO 9001-2008 certified company has its sprawling state of the art manufacturing facilities with an installed capacity of 1 million pumps per annum, is strategically situated in central India at Pithampur in the state of Madhya Pradesh, India. It manufactures diverse models of submersible pumps and motors and other application pumps for a wide range of applications. Shakti Pumps offers comprehensive and reliable pumping solutions with superior quality and energy efficiency. The pumps are largely used for applications like drinking water supply, agriculture, irrigation, industrial applications and processes, pressure boosting in high rise buildings and townships, rural/urban community water supply schemes, waste and sewage water treatments, firefighting.
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31, 2013-2016E FY13A FY14A FY15E FY16E I EQUITY AND LIABILITIES A) Shareholder's Funds a) Share Capital 152.44 152.44 159.94 159.94 b) Reserves and Surplus 948.30 1176.10 1464.33 1782.70 Sub-Total- Total Net worth 1100.74 1328.54 1624.27 1942.64 B) Share Warrant Money 0.00 30.00 25.00 20.00 C) Non Current Liabilities a) long term borrowing 207.20 269.90 191.63 143.72 b) Deferred Tax Liabilities 45.30 57.50 68.43 78.00 Total Non Current liabilities 252.50 327.40 260.05 221.73 D) Current Liabilities a) Short term borrowings 617.30 688.30 708.95 723.13 b) Trade payables 209.80 268.30 313.91 351.58 c) Other Current liabilities 193.90 303.80 373.67 440.94 d) Short term Provisions 94.40 159.00 203.52 246.26 Sub-Total- Current Liabilities 1115.40 1419.40 1600.05 1761.90 TOTAL EQUITY AND LIABILITIES (A + B + C+D) 2468.64 3105.34 3509.38 3946.27 II APPLICATION OF FUNDS E) Non-Current Assets Fixed Assets i. Tangible assets 802.71 895.82 989.88 1088.87 ii. Capital Work in Progress 0.00 15.40 24.95 32.43 a) Sub-Total-Total Fixed Assets 802.71 911.22 1014.83 1121.30 b) Non-current investments 5.50 5.50 5.50 5.50 c) Long Term loans and advances 114.10 188.70 141.53 148.60 d) Other non-current assets 58.80 170.00 241.40 289.68 Sub-Total-Non-Current Assets 981.11 1275.42 1403.25 1565.08 F) Current Assets a) Inventories 658.41 633.20 775.25 907.04 b) Trade receivables 641.21 936.31 996.23 1063.31 c) Cash and Bank Balances 43.90 65.91 85.68 107.10 d) Short-terms loans & advances 144.01 194.50 248.96 303.73 Sub-Total-Total Current Assets 1487.53 1829.92 2106.13 2381.19 TOTAL ASSETS (E+F) 2468.64 3105.34 3509.38 3946.27
Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales 2103.35 3067.42 3149.68 3414.26 Other Income 56.59 0.00 0.00 0.00 Total Income 2159.94 3067.42 3149.68 3414.26 Expenditure -1785.16-2516.90-2543.68-2741.65 Operating Profit 374.78 550.52 606.01 672.61 Interest -112.80-125.86-141.39-156.94 Gross profit 261.98 424.66 464.62 515.67 Depreciation -50.05-67.67-97.53-112.16 Profit Before Tax 211.93 356.99 367.09 403.51 Tax -27.48-91.85-78.91-85.14 Net Profit 184.45 265.14 288.18 318.37 Equity capital 152.44 152.44 159.94 159.94 Reserves 948.30 1176.15 1464.33 1782.70 Face value 10.00 10.00 10.00 10.00 EPS 12.10 17.39 18.02 19.91 Quarterly Profit & Loss Statement for the period of 30 th Jun, 2014 to 31 st Mar, 2015E Value(Rs.in.mn) 30-Jun-14 30-Sep-14 31-Dec-14 31-Mar-15E Description 3m 3m 3m 3m Net sales 697.01 557.09 852.33 1043.25 Other income 0.00 0.00 0.00 0.00 Total Income 697.01 557.09 852.33 1043.25 Expenditure -556.62-459.91-694.63-832.52 Operating profit 140.39 97.18 157.70 210.74 Interest -36.14-32.17-34.80-38.28 Gross profit 104.25 65.01 122.90 172.46 Depreciation -19.34-23.19-27.28-27.72 Profit Before Tax 84.91 41.82 95.62 144.74 Tax -16.98-8.36-19.12-34.45 Net Profit 67.93 33.46 76.50 110.29 Equity capital 152.44 159.94 159.94 159.94 Face value 10.00 10.00 10.00 10.00 EPS 4.46 2.09 4.78 6.90
Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) 12.10 17.39 18.02 19.91 EBITDA Margin (%) 17.82 17.95 19.24 19.70 PBT Margin (%) 10.08 11.64 11.65 11.82 PAT Margin (%) 8.77 8.64% 9.15 9.32 P/E Ratio (x) 18.88 13.14 12.68 11.48 ROE (%) 16.76 19.96 17.74 16.39 ROCE (%) 22.07 27.03 27.86 27.93 Debt Equity Ratio 0.75 0.72 0.55 0.45 EV/EBITDA (x) 11.38 7.95 7.38 6.56 Book Value (Rs.) 72.21 87.15 101.56 121.46 P/BV 3.16 2.62 2.25 1.88 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 228.50, the stock P/E ratio is at 12.68 x FY15E and 11.48 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.18.02 and Rs.19.91 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 20% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 7.38 x for FY14E and 6.56 x for FY15E. Price to Book Value of the stock is expected to be at 2.25 x and 1.88 x respectively for FY15E and FY16E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs.263.00 for Medium to Long term investment.
INDUSTRY OVERVIEW India's gross domestic product (GDP) grew by only 4.7 per cent in 2013-14, the second successive year of sub 5% growth. A weak performance by the manufacturing and services sectors slowed the pace of economic expansion in the current year. The business sentiments remain weak despite reform initiatives. Weak industrial performance is likely to persist on account of factors like lackluster external demand and absence of reliable power supply source amidst coal shortages. Infrastructure projects in power and road construction are held back by problems like coal supply, environmental clearances, land acquisition and financial closure. In spite of the ongoing challenges, the Indian pump industry is expected to grow at 8 per cent year-on-year to reach Rs.14,000 crore by 2017-18 from Rs. 85000 mn currently as India aspires to take a centre stage on the global economic landscape. The market demand will be driven by investments in water, irrigation, oil and gas and industry segments. The market to an extent will be influenced by decisions and policies taken for infrastructure projects, especially power and irrigation projects. Today, in India, as in the rest of the world, there is a huge thrust on clean energy generation. It is also very essential to use energy efficient products and systems. Lifecycle cost analysis reveals energy cost is a major component of total cost of ownership of any power driven products. The operating and maintenance costs constitute approximately 80 per cent of the lifecycle cost of pumps. Pumps consume 30 per cent of the total power generated. Thus, some customers are changing their procurement approach from price of acquisition to cost of ownership of the products. Eventually, regulations are bound to come into effect which will enforce usage of energy efficient products. Global Pumps Industry According to Industry estimates, the world market for pumps used by industry, municipalities and for irrigation will grow to $45 billion per year in 2017, adding more than $7 billion to annual sales in 2013. East Asia will account for more than 1/3rd of the market in 2017, with growth in this region driven mostly by new infrastructure and heavy industrial spending. More power plants will be built in this region in the next five years than in the rest of the world combined. Investment in municipal wastewater treatment and drinking water facilities is also expected to outstrip other regions. Because of aridity in much of the region, investment in irrigation pumps is also figured to be substantial. Growth in North America will be led by the non-conventional oil and gas sector, whereas Western Europe is expected to be a slow growth market characterized by a large percentage of replacement pumps. Eastern Europe will reflect growth in expenditures to meet environmental regulations required for European Union membership. Middle East expenditures will rise as the region increasingly becomes a supplier of refined rather than raw products. There will be a strong demand for pumps from developing countries like China and India due to industrialization and investments in infrastructure.
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