Saturday, November 23, 2013
In last one year or so Investors preference clearly changed in favor of export oriented businesses due to sharp fall in the value of Rupee. Conventional forex earners like IT and Pharma out performed during this period.But unfortunately ,investors in general ignored forex earning companies from other sectors and hence such companies still quoting at lower multiples even if their business improved due to rupee depreciation. This week let us look into one such company – Shakti Pumps.Shakti Pumps is India’s largest stainless steel submersible pump maker located at Pithampur Madhya Pradesh . Company is the first five star rated pump manufacturer in India. In addition to submersible pumps ,company also producing Vertical Multistage Centrifugal pumps,Pressure booster pumps,Open well pumps,End suction pumps..etc. Recently company introduced pumps working with solar power.This product is expected to get strong support from government for rural irrigation purpose .A major chunk of company’s income coming from exports to various countries and export showing good growth over past few years.Now company is planning to extent its presence in all BRIC countries and European Union countries.Company having a sizable business in Indian market too and it planning to increase its dealer network by 3 fold in next few years.
It is one of the fastest growing companies from this sector .From Rs.41 Cr sales in 2006 it reached a top line of Rs.210 Cr in 2013. Its export thrust and improvement in India’s rural economy is expected to drive further growth .Company is targeting a turnover of Rs.600 Cr in next three years.In the latest September quarter Company reported a jump of 50 % in its turnover and profit compared with last year’s same quarter.Pledging of shares by promoters is the only reason for some concern.But ,since its financial performance is improving quarter over quarter ,I don’t expect much issues from this angle.Moreover pledge is not with any NBFC but with one of its bankers - Axis Bank.Company having a dividend paying track record of past 8 years and issued bonus shares in the ratio of 1:1 in 2011.
Shakti is expected to report an EPS of Rs.15 in this full year.At current market price of Rs.58 ,it is trading at a P/E multiple of below 4 . Recently company appointed film star Amitabh Bachchan as its brand ambassador ( Link to new TVC. HERE) .Considering management’s aggressive expansion in production capacity and marketing network, I believe company can deliver good growth in coming years. Recommending Shakti Pumps @ Rs.58 for investors with some risk appetite for medium to long term.Stock listed both in NSE and BSE
To view corporate film * , Link HERE
Link to latest AR HERE
* Corporate film created by company itself ,hence claims may be biased
Disc: I have vested interest in Shakti Pumps.
Posted by VALUEPICK at 8:13 AM