1
Apr 27, 2018
KSB Pumps Ltd
Industrials - Machinery
KSB Pumps Ltd
India Research - Stock Broking
SELL
Bloomberg Code: KSB IN
Recommendation (Rs.)
CMP (as on Apr 27, 2018) 836
Target Price 800
Downside (%) 4
Stock Information
Mkt Cap (Rs.mn/US$ mn) 28612 / 429
52-wk High/Low (Rs.) 938 / 656
3M Avg. daily value (Rs. mn)
15.9
Beta (x) 0.6
Sensex/Nifty 34980 / 10692
O/S Shares(mn) 34.8
Face Value (Rs.) 10.0
Shareholding Pattern (%)
Promoters 66.5
FIIs 3.5
DIIs 15.7
Others 14.3
Stock Performance (%)
1M 3M 6M 12M
Absolute 5 (4) 4 18
Relative to Sensex (1) (1) (2) 1
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 Dec (Rs. Mn) CY15 CY16 CY17 CY18E CY19E
Net Sales 8188 8270 9443 9838 10658
EBITDA 1041 983 1070 1082 1279
EBITDA Margin (%) 12.7 11.9 11.3 11.0 12.0
Net Prot 698 618 707 731 785
EPS (Rs.) 20.1 17.7 20.3 21.0 22.6
RoE (%) 12.6 10.4 10.6 10.3 10.2
PE (x) 28.7 35.4 41.7 39.7 37.0
Source: Company, Karvy Research; *Represents multiples for CY15 - CY17 are based on historic market price
Margin Contraction in Pumps Segment Continued...
The company’s performance was below our expectations lagging by 8% in revenues.
There is a margin contraction in pumps segment which is down by 145 bps. The
revenue for Q1CY18 Rs. 2128 mn was marginally down as against Rs. 2174 mn
showing a decline of 2.3%. The increase in depreciation expense due to capacity
expansion and lower other income impacted EBIT which was down by 10.3%.
Pumps segment laggard the overall performance, Valves segment
performed well: The pumps segment revenues have declined 5.8% YoY with EBIT
margin decline of 145 bps. Pumps segment is going through a tough phase facing
competition and pricing pressure with increased raw material prices. Whereas
the valves segment has performed well by showing a growth of 17.2% YoY. The
absolute EBIT has also shown a growth of 45.5% YoY with margins improving to
4.4% from 3.3% during Q1CY17.
Capacity expansion: The company has started operations at its manufacturing
facility in Satara, where it is manufacturing super critical boiler feed pumps and is
considering to manufacture API certied pumps for Oil & Gas industry. Given the
technology expertise, company has been awarded with an order for coolant pumps
with electric motor from NCPIL worth Rs. 4130 mn.
Valuation and Risks:
With technology support from its parent company i.e. KSB AG, KSB is well placed
to perform well on capex revival in domestic industrial pumps market as there is
an increased thrust on irrigation projects entailing an expenditure of Rs. 40000
mn. On the balance sheet front, company is a debt free company with surplus
cash on the balance sheet. The recent order win of Rs. 4130 mn from NPCIL for
supply of coolant pumps with electric motor is a very crucial order and would be
completed in a phased manner by 2022. We expect the company to take advantage
of government’s thrust on doubling the farm income and favorable monsoon
prediction by MET department. Keeping in view the contraction of margins in its
major segment, lower demand and higher valuation (37x to FY19E), we value KSB
for a target price of Rs. 800 representing a downside of 4%.
80
95
110
125
140
Apr-17
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
KSB Pumps Ltd
Sensex
2
Apr 27, 2018
KSB Pumps Ltd
Revenue has declined
marginally and EBIT
margins are down due
to higher depreciation
expense and lower other
income.
Pumps segment has
underperformed in both
revenues and margins
front.
Exhibit 2: Q4FY18
YE Mar (Rs. Mn) Q4FY18 Q3FY18 QoQ % Q4FY17 YoY %
Turnover 2125 3282 (35.3) 2175 (2.3)
Expenditure 1927 2859 (32.6) 1972 (2.3)
EBITDA 198 423 (53.2) 203 (2.5)
Depreciation 97 85 14.1 74 31.6
Interest 5 8 (33.3) 22 (77.6)
PBT 96 331 (71.0) 107 (10.3)
Other Income 77 98 (21.0) 96 (20.1)
Exceptional items 0 0 NM 52 NM
Ta x 61 155 (60.6) 70 (12.9)
PAT 112 274 (59.0) 133 (16.0)
EBITDA Margin (%) 9.3 12.9 (358) bps 9.3 (2) bps
EBIT Margin (%) 4.8 10.3 (555) bps 5.9 (119) bps
Net Prot Margin (%) 5.3 8.3 (306) bps 6.1 (86) bps
Source: Company, Karvy Research
Exhibit 3: Segmental Financials
YE Mar (Rs. Mn) Q4FY18 Q3FY18 QoQ % Q4FY17 YoY %
Segment-wise revenues
Pumps 1728 2761 (37.4) 1834 (5.8)
Valves 395 522 (24.3) 337 17.2
Segment-wise EBIT
Pumps 168 395 (57.5) 205 (18.0)
Valves 16 54 (70.4) 11 45.5
Segment-wise EBIT Margin (%)
Pumps 9.7 14.3 (458) bps 11.2 (146) bps
Valves 4.1 10.3 (629) bps 3.3 79 bps
Source: Company, Karvy Research
Exhibit 4: Revenue break up - Q1CY18
Source: Company, Karvy Research
Exhibit 5: Revenue break up - Q1CY17
Source: Company, Karvy Research
Pumps
81.4%
Valves
18.6%
Pumps
84.5%
Valves
15.5%
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Apr 27, 2018
KSB Pumps Ltd
Exhibit 6: KSB Pumps - PE Band
Source: Bloomberg, Karvy Research
Exhibit 7: Nifty Infra - PE Band
Source: Bloomberg, Karvy Research
Apr-15
May
-
15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec
-15
Jan-16
Feb-16
Mar-16
Apr
-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
1 Yr Forward PE
1 Yr Average PE
1SD
2SD
-1SD
-2SD
10
15
20
25
30
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug
-15
Oct-15
Dec
-15
Feb-16
Apr-16
Jun
-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
1 yr forward PE
Avereage PE
1SD
2SD
-1SD
-2SD
4
Apr 27, 2018
KSB Pumps Ltd
Financials
Exhibit 8: Income Statement
YE Dec (Rs. Mn) CY15 CY16 CY17 CY18E CY19E
Revenues 8188 8270 9443 9838 10658
Growth (%) 2.1 1.0 14.2 4.2 8.3
Operating Expenses 7147 7287 8373 8756 9379
EBITDA 1,041 983 1,070 1,082 1,279
Growth (%) 4.8 (5.6) 8.9 1.1 18.2
Depreciation & Amortization 278 294 309 334 359
EBIT 1072 947 1079 1097 1303
Other Income 309 258 317 349 384
Interest Expenses 17 17 37 20 20
PBT 1055 930 1042 1077 1283
Tax 357 313 335 346 498
Adjusted PAT 698 618 707 731 785
Growth (%) 6.7 (11.6) 14.6 3.4 7.3
Source: Company, Karvy Research
Exhibit 9: Balance Sheet
YE Dec (Rs. Mn) CY15 CY16 CY17 CY18E CY19E
Cash & Cash Equivalents 2252 1974 858 1897 2157
Sundry Debtors 1771 1797 2610 2426 2628
Inventory 1826 2119 2476 2232 2365
Loans & Advances 846 1090 869 752 768
Investments 63 63 63 63 63
Net Block 1941 2186 3082 3189 3329
CWIP 142 165 41 41 41
Miscellaneous 169 205 196 217 212
Total Assets 9011 9599 10294 10915 11663
Current Liabilities & Provisions 3101 3196 3053 3251 3423
Debt 13 52 109 87 70
Other Liabilities 365 432 457 461 498
Total Liabilities 3479 3680 3619 3799 3991
Shareholders Equity 348 348 348 348 348
Reserves & Surplus 5184 5571 6327 6768 7323
Total Networth 5532 5919 6675 7116 7671
Total Networth & Liabilities 9011 9599 10294 10915 11663
Source: Company, Karvy Research
We expect the revenues to
grow at 3% CAGR during
CY17-19E. Margins to
reach 12% by CY19E.
5
Apr 27, 2018
KSB Pumps Ltd
Exhibit 10: Cash Flow Statement
YE Dec (Rs. Mn) CY15 CY16 CY17 CY18E CY19E
PBT 1055 930 1042 1077 1283
Depreciation 278 294 309 334 359
Interest 17 17 37 20 20
Inc/dec in Net WC 331 (70) (1068) 726 (137)
Other Income (235) (187) (114) (349) (384)
Other non cash items (6) (0) (5) 0 0
Ta x (281) (395) (450) (346) (498)
Cash ow from operating activities 1159 589 (249) 1463 643
Inc/dec in capital expenditure (370) (798) (818) (500) (500)
Others 257 182 146 349 384
Cash ow from investing activities (112) (616) (672) (151) (116)
Inc/dec in borrowings (231) 39 57 (22) (17)
Dividend paid (222) (230) (230) (230) (230)
Interest paid (17) (17) (37) (20) (20)
Cash ow from nancing activities (470) (209) (210) (272) (267)
Net change in cash 576 (236) (1132) 1040 260
Source: Company, Karvy Research
Exhibit 11: Key Ratios
YE Dec CY15 CY16 CY17 CY18E CY19E
EBITDA Margin (%) 12.7 11.9 11.3 11.0 12.0
EBIT Margin (%) 13.1 11.5 11.4 11.1 12.2
Net Prot Margin (%) 8.5 7.5 7.5 7.4 7.4
Dividend Payout Ratio (%) 21.9 24.8 21.6 20.9 19.5
Net Debt/Equity (x) (0.4) (0.3) (0.1) (0.3) (0.3)
RoE (%) 12.6 10.4 10.6 10.3 10.2
RoCE (%) 12.6 10.3 10.4 10.2 10.1
Source: Company, Karvy Research
Exhibit 12: Valuation Parameters
YE Dec CY15 CY16 CY17 CY18E CY19E
EPS (Rs.) 20.1 17.7 20.3 21.0 22.6
DPS (Rs.) 4.4 4.4 4.4 4.4 4.4
BVPS (Rs.) 152.1 164.5 180.9 198.1 212.5
PE (x) 28.7 35.4 41.7 39.7 37.0
P/BV (x) 3.8 3.8 4.7 4.2 3.9
EV/EBITDA (x) 17.1 20.3 26.8 25.1 21.1
EV/Sales (x) 2.2 2.4 3.0 2.8 2.5
Source: Company, Karvy Research; *Represents multiples for CY15 - CY17 are based on historic market price
6
Apr 27, 2018
KSB Pumps Ltd
Stock Ratings Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : < 5%
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