1
May 22, 2018
Shakti Pumps (India) Ltd
India Research - Stock Broking
HOLD
Recommendation (Rs.)
CMP (as on May 22, 2018) 572
Target Price 600
Previous Target Price 587
Upside (%) 5
Stock Information
Mkt Cap (Rs.mn/US$ mn) 10506 / 154
52-wk High/Low (Rs.) 790 / 332
3M Avg. daily volume (mn)
0.4
Beta (x) 1.2
Sensex/Nifty 34651 / 10537
O/S Shares(mn) 18.4
Face Value (Rs.) 10.0
Shareholding Pattern (%)
Promoters 47.7
FIIs 0.2
DIIs 2.0
Others 50.1
Stock Performance (%)
1M 3M 6M 12M
Absolute (23) 2 33 50
Relative to Sensex (24) (0) 29 32
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
Analyst Contact
Ankit Soni
040 - 3321 6274
soni.ankit@karvy.com
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 available on Thomson Reuters &
Bloomberg (Code: KRVY<GO>)
Exhibit 1: Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Net Sales 2638 4049 4131 4728 5241
EBITDA 211 533 689 780 865
EBITDA Margin (%) 8.0 13.2 16.7 16.5 16.5
Net Prot 20 213 271 340 391
EPS (Rs.) 1.2 11.6 14.7 18.5 23.4
RoE (%) 1.0 9.6 10.9 12.8 13.2
PE (x) 124.1 16.9 36.9 30.9 26.8
Source: Company, Karvy Research; *Represents multiples for FY16 & FY18 are based on historic market price
Realizations and Deferred Orders Lag the Performance
Shakti’s revenue de-grew by 24.7% YoY due to deferment of solar integrated orders
from Madhya Pradesh which they got in this quarter. Shakti is still looking for a
major traction in solar pumps business as there is a huge opportunity in the solar
pump segment. The absolute EBITDA and margins have declined by 29.5% and
91 bps respectively.
Solar Pumps Market: The volumes of solar pumps were as per our expectations
but realizations have turned down the performance. The company has executed
4500 pumps (3700 pumps last year) under solar integrated business and 31000
pumps under solar OEM business. The company is betting big on Government
policy KUSUM and International Solar Alliance (ISA). As per the management any
small step taken towards implementing this policy shall open the big opportunities
for the company. The company has executed total of 141000 pumps for FY18. The
solar integrated orders from MP and Rajasthan (2000 pumps) were deferred due
to which the volumes were lower on integrated business. As per the management
these orders have come in this quarter and will be executed by next quarter. We are
little skeptical about the execution in the coming quarters due to elections in major
states like Rajasthan, Madhya Pradesh where Shakti has a strong presence.
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 Q4FY18
the company has made a total sale of Rs.1307 mn of export sales. The company
expects a very good business from the new markets like Africa, LATAM on the base
of International Solar Alliance (ISA).
Valuation and Risks
We expect the revenues to grow at a CGAR of 9% during FY17-20E being a little
skeptical about the orders from Rajasthan and MP due to elections. KUSUM policy
and ISA projects are just proposed. There will be huge opportunity if some initiation
will be taken towards the KUSUM policy. The stock is currently trading at 26.8x to
FY20EPS. Valuations are stretched which makes us maintain our “HOLD” rating
for a target price of Rs 600 for a P/E of 25x (3 years Average P/E) on FY20EPS.
Earnings Revision (%)
YE Mar FY19E FY20E
Sales (%) (9.4) (8.2)
EBITDA (%) (9.4) (8.2)
PAT (%) (18.9) (16.5)
Source: Karvy Research
L
L
L
L
L
L
Company Update
Industrials - Capital Goods
Shakti Pumps (India) Ltd
Bloomberg Code: SKPI IN
80
115
150
185
220
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar -18
Apr-18
May-18
Shakti Pum ps (India) Ltd
Sensex
2
May 22, 2018
Shakti Pumps (India) Ltd
Key takeaways from quarterly earnings
Integrated solar volumes were lower due to delay of orders from Rajasthan and
Madhya Pradesh, which they bagged in this quarter.
The company expects the process of tendering and nalization to be speeding up
due to elections in MP and Rajasthan.
Kusum and ISA policy to be the big game changers for Shakti pumps as it will be
huge opportunity size and Shakti being a market leader looks to take advantage
from it.
The company’s VFD manufacturing unit has been operational in full swing.
The company is expected to maintain the debt at the same levels.
The company expects the total turnover of around Rs. 3400 mn from solar segment.
The revenues were down
due to deerment of orders
from Rajasthan and MP
and lower realizations per
pumps in the integrated
business.
KUSUM and ISA to be the
game changers for solar
business of Shakti pumps.
Exhibit 2: Q4FY18
YE Mar (Rs. Mn) Q4FY18 Q3FY18 QoQ % Q4FY17 YoY %
Turnover 1244 1415 (12.1) 1653 (24.7)
Op. Expenditure 1077 1129 (4.7) 1415 (23.9)
EBITDA 167 286 (41.4) 237 (29.5)
Depreciation 35 36 (1.7) 32 7.6
Interest 43 34 25.1 42 1.8
PBT 89 216 (58.6) 163 (45.0)
Tax (net) 74 73 1.6 53 38.8
PAT 16 143 (89.1) 109 (85.7)
EBITDA Margin (%) 13.4 20.2 (674) bps 14.4 (91) bps
EBIT Margin (%) 10.6 17.7 (703) bps 12.4 (175) bps
Net Prot Margin (%) 1.3 10.1 (886) bps 6.6 (536) bps
Source: Company, Karvy Research
Exhibit 3: Change in Earnings Estimates
YE Mar - Standalone (Rs. Mn)
FY19E FY20E
Coments
Old New % Change Old New % Change
Net Sales 4728 5218 (9.4) 5241 5709 (8.2)
The lower realisations
on integrated pumps
have made us lower the
projections. We maintain
the margins as projected
earlier.
EBITDA 780 861 (9.4) 865 942 (8.2)
EBITDA Margin (%) 16.5 16.5 0 bps 16.5 16.5 0 bps
Adj. PAT 340 419 (18.9) 391 469.0 (16.5)
EPS (Rs.) 18.5 22.8 (18.9) 23.4 28.0 (16.5)
Source: Karvy Research
3
May 22, 2018
Shakti Pumps (India) Ltd
Exhibit 4: Shakti Pumps - 3yr PE Band
Source: Bloomberg, Karvy Research
Exhibit 5: Nifty Infrastructure - 5yr PE Band
Source: Bloomberg, Karvy Research
1000
2000
3000
4000
15
17
19
21
23
25
May-13
Aug-13
Nov-
13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Aug
-15
Nov-15
Feb-16
May-16
Aug-16
Nov-16
Feb-17
May-17
Aug-17
Nov-17
Feb-18
May-18
Average P/E
1STD
Price (Rs.) (RHS)
0
10
20
30
40
50
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
Mar-18
1yr forward PE
Average P/E
1STD
-1 STD
4
May 22, 2018
Shakti Pumps (India) Ltd
Financials
Exhibit 6: Income Statement
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Revenues 2638 4049 4131 4728 5241
Growth (%) (11.6) 53.5 2.0 14.4 10.9
Operating Expenses 2427 3516 3443 3948 4376
EBIDTA 211 533 689 780 865
Growth (%) (54.6) 152.3 29.3 13.2 10.9
Depreciation & Amortization 121 128 139 146 156
Other Income 84 68 29 30 32
EBIT 174 473 578 664 741
Interest Expenses 140 160 136 165 156
PBT 34 313 442 500 584
Tax 15 100 171 160 193
Adjusted PAT 20 213 271 340 391
Growth (%) (92.3) 979.5 27.1 25.4 15.2
Source: Company, Karvy Research
Exhibit 7: Balance Sheet
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
Cash & Equivalents 63 104 201 195 221
Sundry Debtors 942 1561 1518 1684 1867
Inventory 841 853 999 988 1096
Loans & Advances 355 408 439 470 474
Investments 6 20 102 102 102
Net Block 1101 1212 1181 1232 1227
CWIP 6 20 102 102 102
Miscellaneous 276 35 41 42 43
Total Assets 3666 4194 4487 4714 5028
Current Liabilities & Provisions 675 1040 813 814 873
Debt 870 814 1045 1097 1042
Other Liabilities 70 123 139 139 140
Total Liabilities 1615 1977 1996 2050 2055
Shareholders Equity 317 184 184 184 184
Reserves & Surplus 1733 2033 2306 2480 2790
Total Networth 2051 2217 2490 2664 2974
Total Networth & Liabilities 3666 4194 4487 4714 5028
Source: Company, Karvy Research
The revenues will be
growing on the back of
higher contribution from
solar integrated business
and export business.
5
May 22, 2018
Shakti Pumps (India) Ltd
Exhibit 8: Cash Flow Statement
YE Mar (Rs. Mn) FY16 FY17 FY18 FY19E FY20E
PBT 20 213 271 340 391
Depreciation 121 128 139 146 156
Interest 111 122 136 165 156
Inc/dec in Net WC 183 (125) (329) (154) (230)
Other Income (17) (2) (29) (30) (32)
Other non cash items 2 239 - - -
Cash ow from operating activities 420 576 188 466 442
Inc/dec in capital expenditure (198) (158) (150) (146) (146)
Inc/dec in investments - (14) (81) - -
Others 19 (76) 68 23 24
Cash ow from investing activities (179) (248) (164) (124) (122)
Inc/dec in borrowings 1 (145) 231 52 (55)
Issuance of equity - - 0 - -
Dividend paid (50) (61) (82) (82) (82)
Interest paid (111) (122) (136) (165) (156)
Cash ow from nancing activities (161) (328) 13 (194) (293)
Net change in cash 80 (0) 37 149 26
Source: Company, Karvy Research
Exhibit 9: Key Ratios
YE Mar FY16 FY17 FY18 FY19E FY20E
EBITDA Margin (%) 8.0 13.2 16.7 16.5 16.5
EBIT Margin (%) 6.6 11.7 14.0 14.1 14.1
Net Prot Margin (%) 0.7 5.3 6.6 7.2 7.5
Dividend Payout Ratio (%) 127.2 17.2 10.2 8.1 6.4
Net Debt/Equity (x) 0.1 0.2 0.2 0.2 0.1
RoE (%) 1.0 9.6 10.9 12.8 13.2
RoCE (%) 0.6 6.9 7.7 9.0 9.7
Source: Company, Karvy Research
Exhibit 10: Valuation Parameters
YE Mar FY16 FY17 FY18 FY19E FY20E
EPS (Rs.) 1.2 11.6 14.7 18.5 23.4
DPS (Rs.) 1.5 2.0 1.5 1.5 1.5
BVPS (Rs.) 123.8 116.1 128.0 140.2 153.4
PE (x) 124.1 16.9 36.9 30.9 26.8
P/BV (x) 1.2 1.7 4.3 4.1 3.7
EV/EBITDA (x) 12.7 7.7 15.1 14.0 12.6
EV/Sales (x) 1.0 1.0 2.5 2.3 2.1
Source: Company, Karvy Research; *Represents multiples for FY16 - FY18 are based on historic market price
6
May 22, 2018
Shakti Pumps (India) Ltd
Stock Ratings Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : < 5%
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