Shakti pumps is one of the largest Submersible and Stainless steel pump manufacturer in the country.
Shakti pumps is known for its products that are of superior quality and the energy efficiency that it provides. The products for Shakti pumps are found to be 30% more energy efficient that that of its competitors.
Shakti Pumps (India) Ltd
HBJ Capital, India Web: www.hbjcapital.com E-Mail: firstname.lastname@example.org Call: +91 98867 36791
Best Buying Price…
2 Phase Buying Strategies Suggested [Always buy in SIP ways] 1st Phase : Buy at the current price range Rs 98 -106 [70% of investment] 2nd Phase : Add if the price falls down to Rs 80 - 92 [30% of investment] There is a strong support for the counter between Rs 88 - 92
>>>Expect at least 60-100% return in next 12 months time period!!!
Shakti Pumps (India) Ltd – An overview
Shakti Pumps is a renowned company for producing stainless steel submersible pumps, energy saving submersible motors and SRN booster pumps, water pumps and motors in India. The company also supplies these pumps and motors to various countries all over the world. The company established in the year 1982 as a small unit, Shakti Pumps Ltd, became a public limited company in 1995 and is engaged in manufacturing of Submersible Pumps, along with motors and associated control panels under the brand name Shakti. Shakti pumps has been able to penetrate the lucrative export segment only due to the superior quality of its products. It is commendable that the company has capture clients from markets where Grundfos has been operating. The company has achieved the target of selling one million pumps. It is exporting pump sets to more than 50 countries, developing as well as developed, where quality is well accepted. The products of the company find its application in domestic, industrial and community water supply, irrigation (including drip and sprinkler irrigation), Various civil and industrial applications, booster, fire fighting and de watering. The company was the first to get 5 star rating for energy efficiency for its products from BEE.
Strong rebound in growth to continue
The company in the financial year ending June 2007 came up with a plan to increase its production capacity from 50,000 pumps per year to 250,000 pumps per year by setting up a new plant in a SEZ in Pithampur. The company had huge demand that it was not able to cater to and hence went ahead with its expansion plan. After the new production unit, as indicated by the management, it did a turnover of more than 100 crore in the financial year June 08. However, since then due to the economic slow down, the revenues have been on a down slide. Since the company derives more than 60% of revenues by way of exports, it was severely affected. However, the company managed to end the financial year ending June 09, with a marginal increase in sales and net earnings. With the demand picking up again, we expect the company to benefit from the increased production capacities. The rebound in demand and growth is evident from the above financial results on a sequential basis. Since the Mar quarter, the revenues have increased by 33% and the net earnings has almost doubled.
Valuations to improve
It is highly likely that the valuations of Shakti pumps will improve along with the rebound in earnings. Even based on the earnings from the previous financial year, Shakti pumps is trading at a Mcap of 66 crore Vs 174 crore of WPIL, in spite of almost the same earnings. Also, when compared even with the larger peers, the profitability ratios of Shakti pumps are superior and next only to KSB pumps. The two major reason for higher margins are 1) Superior quality of the pumps 2) Higher exposure to export markets. Excluding the above comparison, on a 5 year historic basis, Shakti pumps has been trading with a PE range of 20 to 40. The low that the company made was at 5.27 in Mar 2009. The company is currently available at one of the lower most range and this presents an opportunity to take an exposure.
Key expectations and targets
There is a very strong promoter holdings at 50%. Two FII s namely Melchior and Silver Stallion hold around 6% in the company. Mumbai based Subhkam ventures holds around 12% in the company. It increased its stake from just 3% to 12% in June 2008. The Interest expense of the company is expected to be remain flat with out any major surge. We expect the company to benefit immensely from the subdued steel prices currently. We expect the benefit to flow in for the next few quarters as well. With the above estimate, the following are our 6 months and 12 months conservative price targets :– 6 months target – Rs. 140 (36% appreciations from the Recommendation price of Rs. 102.90) 12 months target – Rs. 180 (around 75% appreciation from the Recommendation price or Rs. 102.90)