1
Feb 21, 2018
Shakti Pumps (India) Ltd
Recommendation (Rs.)
CMP (as on Feb 20, 2018) 540
Target Price 587
Previous target price 572
Upside (%) 9
Stock Information
Mkt Cap (Rs.mn/US$ mn) 9919 / 153
52-wk High/Low (Rs.) 615 / 160
3M Avg. daily volume (mn) 0.3
Beta (x) 1.7
Sensex/Nifty 33704 / 10360
O/S Shares(mn) 18.4
Face Value (Rs.) 10.0
Shareholding Pattern (%)
Promoters 47.6
FIIs 0.0
DIIs 0.4
Others 52.0
Stock Performance (%)
1M 3M 6M 12M
Absolute 11 29 6 227
Relative to Sensex 16 27 (0) 178
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
For private circulation only. For important information about Karvy’s rating system and other disclosures refer
to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>,
Thomson Publishers & Reuters
Exhibit 1: Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18E FY19E FY20E
Net Sales 2638 4049 4759 5218 5709
EBITDA 211 533 761 861 942
EBITDA Margin (%) 8.0 13.2 16.0 16.5 16.5
Adj. Net Prot 20 213 362 419 469
EPS (Rs.) 1.2 11.6 19.7 22.8 28.0
RoE (%) 1.0 9.6 14.2 14.2 13.8
PE (x) 124.1 16.9 27.4 23.7 21.2
Source: Company, Karvy Research; *Represents multiples for FY16 & FY17 are based on historic market price
Company Update
India Research - Stock Broking
HOLD
Industrials - Capital Goods
Shakti Pumps (India) Ltd
Bloomberg Code: SKPI IN
Analyst Contacts
Ankit Soni | De Arul Kaarthick
040 - 3321 6274/80
soni.ankit@karvy.com
arul.kaarthick@karvy.com
Solar Pumps to be the Growth Driver
Shakti’s revenue grew by 47.4% YoY, majorly supported by a very strong performance
from solar pump integrated business and solar OEM business. The margins also
improved by 448 bps YoY, due to higher operating leverage and economies of
scale. Orders worth Rs. 3000-3500 mn have been already allocated under the solar
segment and expect a good bunch of orders from OEM side of business.
Solar Pumps Market: The solar pumps market growth could be termed as
one of the growth drivers for Shakti pumps. Solar segment revenue came in at
Rs. 1000 mn representing a 100% QoQ. Solar integrated business has contributed
Rs. 670 mn and Solar OEM business has contributed Rs. 330 mn to total solar
sales. As on 9MFY18 company has made sales of 3171 pumps for integrated
business and 18000 pumps under OEM business. The company claims to be a
market leader in the solar pumps segment with a market share of 60%. Shakti
already has Rs. 3000-3500 mn order book in hand under solar segment.
Budget announcement to boost revenues: The announcement in budget
that excess electricity generated by farmers through solar pumps could be bought
by state electricity companies is going to boost the demand for solar pumps and
indeed would promote green economy. The solar pumps scheme is expected to
have a total cost layout of Rs. 1.4 tn. Shakti expects to install around 5800 pumps
under solar integrated business and 35000 pumps under OEM business. We
expect the solar segment to lead the growth of the company with high demand and
capex to be incurred in the sector.
Export sales to be in focus: Shakti is trying to regain traction in exports market
which they lost in FY16 due to sluggish demand from the gulf countries. In Q1FY18
the company has made a total sale of 914 mn of export sales growing 2% when
compared to respective period of previous nancial year. The company expects
good growth from the new markets like Africa, LATAM and China under International
Solar Alliance (ISA).
Valuation and Risks
We expect the company to do a very large chunk of business in solar pumps market
due their leadership in the segment. We introduce FY20E numbers and relook at
FY18E and FY19E estimates. We value the company at 21x (2 years Avg PE) of
FY20E EPS to arrive at a target price of Rs. 587 representing an upside of 10%.
90
190
290
390
Feb-17
Mar -17
Apr-17
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Shakti Pumps (India) Ltd
Sensex
Earnings Revision (%)
YE Mar FY18E FY19E
Sales (%) (7.3) (18.1)
EBITDA (%) 14.2 3.9
PAT (%) 21.4 5.5
Source: Karvy Research
L
L
L
L
L L
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Feb 21, 2018
Shakti Pumps (India) Ltd
Exhibit 2: Solar pumps sales boost Q3FY18 revenue
YE Mar (Rs. Mn) Q3FY18 Q2FY18 QoQ(%) Q3FY17 YoY(%) 9MFY18 9MFY17 YoY(%)
Turnover 1477 632 133 1002 47.4 2950 2445 20.6
Op. Expenditure 1172 548 114 840 40 2454 2100 16.8
EBITDA 305 84 262 162 88 495 345 43.7
Depreciation 36 35 1 33 9 105 96 9.5
Interest 35 29 22 48 -26 95 121 (21.4)
PBT 234 20 1059 81 187 296 128 130.4
Tax (net) 77 16 384 28 179 108 46 133.2
PAT 157 4 3573 54 192 188 82 128.9
EBITDA Margin (%) 20.6 13.3 734 bps 16.2 448 bps 16.8 14.1 270 bps
EBIT Margin (%) 18.2 7.8 1047 bps 12.9 532 bps 13.3 10.2 306 bps
Net Prot Margin (%) 10.6 0.7 995 bps 5.4 526 bps 6.4 3.4 302 bps
Source: Company, Karvy Research
Key Takeaways of Conference Call
International Solar Alliance: Under ISA, 1 lakh solar pumps has to be installed in India by FY20, which could boost the
volumes of solar pumps. Management expects the orders to come by Q3FY19.
The management expects the solar segment to be boosting revenues with volumes of 5800 pumps in Solar EPC and around
35000 pumps in solar OEM segments.
Shakti would be incorporating a wholly owned subsidiary in Dhaka and China in order to focus on export sales.
Government’s tender nalization to tender execution takes up around 30-40 days. The total receivable days on these
government orders are around 120 days.
The company claims to be holding 80% market share in solar pumps segment.
Exhibit 3: Nifty Infrastructure PE Band
Source: Bloomberg, Karvy Research
Exhibit 4: Shakti Pumps PE Band
Source: Bloomberg, Karvy Research
1000
2100
3200
4300
5400
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-
12
Feb-13
Aug-13
Feb-14
Aug-14
Feb-15
Aug-15
Feb-16
Aug-16
Feb-17
Aug-17
Feb-18
30.6x
26.5x
22.4x
18.3x
14.2x
0
10
20
30
40
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb
-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct
-17
Nov-17
Dec-17
Jan-18
Feb-18
1 yr forward P/E
Average P/E
1STD
-1STD
Exhibit 5: Revised Earnings Estimates
YE Mar - Standalone (Rs. Mn)
FY18E FY19E FY20E Comments
Old New % Change Old New % Change (Introducing)
Net Sales 4759 5132 (7.3) 5218 6375 (18.1) 5709
The volumes are as per our
expectations but the realisations
are down due to lower solar
panel prices. As the volume
grows, the economies of scale
will be improving the margins
further.
EBITDA 761 667 14.2 861 829 3.9 942
EBITDA margin (%) 16.0 13.0 300 bps 16.5 13.0 350 bps 16.5
Adj. PAT 362 298 21.4 419 397.0 5.5 469
EPS (Rs.) 19.7 16.2 21.5 22.8 21.6 5.5 28.0
Source: Karvy Research
3
Feb 21, 2018
Shakti Pumps (India) Ltd
Financials
Exhibit 6: Income Statement
YE Mar (Rs. Mn) FY16 FY17 FY18E FY19E FY20E
Revenues 2638 4049 4759 5218 5709
Growth (%) (11.6) 53.5 17.5 9.6 9.4
Operating Expenses 2427 3516 3998 4357 4767
EBITDA 211 533 761 861 942
Growth (%) (54.6) 152.3 42.9 13.1 9.4
Depreciation & Amortization 121 128 136 146 156
Other Income 84 68 79 82 87
EBIT 174 473 704 798 873
Interest Expenses 140 160 172 182 173
PBT 34 313 532 616 700
Tax 15 100 170 197 231
Adjusted PAT 20 213 362 419 469
Growth (%) (92.3) 979.5 69.7 15.7 12.0
Source: Company, Karvy Research
Exhibit 7: Balance Sheet
YE Mar (Rs. Mn) FY16 FY17 FY18E FY19E FY20E
Cash & Equivalents 63 104 139 339 519
Sundry Debtors 942 1561 1695 1897 2075
Inventory 841 853 1004 1091 1193
Loans & Advances 355 408 410 413 416
Investments 6 20 20 20 20
Net Block 1101 1212 1228 1232 1227
CWIP 6 20 20 20 20
Miscellaneous 276 35 36 37 37
Total Assets 3666 4194 4534 5029 5488
Current Liabilities & Provisions 675 1040 993 1045 1105
Debt 870 814 861 910 864
Other Liabilities 70 123 127 128 129
Total Liabilities 1615 1977 1980 2083 2098
Shareholders Equity 317 184 184 184 184
Reserves & Surplus 1733 2033 2369 2763 3206
Total Networth 2051 2217 2553 2946 3390
Total Networth & Liabilities 3666 4194 4534 5029 5488
Source: Company, Karvy Research
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Feb 21, 2018
Shakti Pumps (India) Ltd
Exhibit 8: Cash Flow Statement
YE Mar (Rs. Mn) FY16 FY17 FY18E FY19E FY20E
PBT 20 213 362 419 469
Depreciation 121 128 136 146 156
Interest 111 122 172 182 173
Inc/dec in Net WC 183 (125) (328) (235) (220)
Other Income (17) (2) (79) (82) (87)
Other non cash items 2 239 - - -
Cash ow from operating activities 420 576 263 429 491
Inc/dec in capital expenditure (198) (158) (148) (146) (146)
Inc/dec in investments - (14) 0 - -
Others 19 (76) 57 59 60
Cash ow from investing activities (179) (248) (91) (87) (86)
Inc/dec in borrowings 1 (145) 46 49 (45)
Issuance of equity - - - - -
Dividend paid (50) (61) (25) (25) (25)
Interest paid (111) (122) (172) (182) (173)
Cash ow from nancing activities (161) (328) (151) (158) (244)
Net change in cash 80 (0) 21 184 162
Source: Company, Karvy Research
Exhibit 9: Key Ratios
YE Mar FY16 FY17 FY18E FY19E FY20E
EBITDA Margin (%) 8.0 13.2 16.0 16.5 16.5
EBIT Margin (%) 6.6 11.7 14.8 15.3 15.3
Net Prot Margin (%) 0.7 5.3 7.6 8.0 8.2
Dividend Payout Ratio (%) 127.2 17.2 7.6 6.6 5.4
Net Debt/Equity (x) 0.1 0.2 0.2 0.1 0.0
RoE (%) 1.0 9.6 14.2 14.2 13.8
RoCE (%) 0.6 6.9 10.6 10.9 11.0
Source: Company, Karvy Research
Exhibit 10: Valuation Parameters
YE Mar FY16 FY17 FY18E FY19E FY20E
EPS (Rs.) 1.2 11.6 19.7 22.8 28.0
DPS (Rs.) 1.5 2.0 1.5 1.5 1.5
BVPS (Rs.) 123.8 116.1 129.8 149.6 172.4
PE (x) 124.1 16.9 27.4 23.7 21.2
P/BV (x) 1.2 1.7 4.2 3.6 3.1
EV/EBITDA (x) 12.7 7.7 13.6 11.8 10.7
EV/Sales (x) 1.0 1.0 2.2 2.0 1.8
Source: Company, Karvy Research; *Represents multiples for FY16 & FY17 are based on historic market price
5
Feb 21, 2018
Shakti Pumps (India) Ltd
Stock Ratings
Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : < 5%
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