-KSB Pumps Ltd. (KSB) is engaged in the business of manufacturing of power driven pumps and industrial valves, which are used in various applications that range from building services to industrial processes, water engineering, mining & energy technology. KSB is also specialized in pumps for Ultra Mega Power Plant (UMPP) projects. It has manufacturing plants in Pimpri, Chinchwad, Vambori & Sinnar in Maharashtra, Coimbatore in Tamil Nadu and Mala in Kerala.
-KSB's Pumps and Valves provide and distribute water to private, public and industrial buildings. It has about 12% market share in pump business and manufactures 50% customized & 50% standard pumps. During CY09, KSB sold about 121398 pumps as against 105656 pumps during CY08. It also manufactured and sold the biggest condensate extraction pumps (WKTA 350/3) for first UMPP in India, ordered by Costal Gujarat Pvt. Ltd. for their 5x800 MW project.
-The Company sold about 98727 valves during CY09 as against 146350 valves during CY08. The substantial decline in the valves division was mainly due to increased competition as one of the leading Indian players, which used to export majority of its production earlier, started selling in domestic market due to sluggish global conditions. However, KSB has taken necessary steps to improve contribution from the division by introducing new range of high pressure valves.
During CY09, KSB's consolidated net revenues stood at Rs. 5658.2 mn showing a marginal decline of 5.4% YoY. However, its EBIDTA increased by 7.5% YoY, while the EBIDTA margins improved by 240 bps YoY to 20%. The improvement in margins can be attributed to a favorable product mix along with its effective cost control management resulting into lower RM cost. Its APAT decreased by 1% to Rs. 708 mn, mainly due to higher depreciation and lower other income. KSB also declared a dividend of 125% for CY09.
-Demand for its pumps are expected to grow substantially given that the municipal waste disposal facilities of the Country need to be modernized and new sewage treatment plants are required. Moreover, the need of desalination of sea water is expected to increase very fast in India. KSB is very well placed and equipped with its special range products to cater the demand of this segment. Necessity of long distance water transportation would also drive the demand for KSB's pumps & valves. Going ahead, though KSB's margins are expected to be under pressure in CY10 as some projects could have been obtained at lower margins due to stiff completion, however with the recovery in economy & the overall business environment, we expect margins to be on track in CY11 with new order inflows.
-At the CMP of Rs. 433, KSB is available at an attractive valuation of 8.7x its FY12E EPS of Rs.50. We believe it can get valued at 12x its FY12E EPS implying a target price of Rs.600.
Source: Internet (Valuenotes by Sushil Finance)
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