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KSB Pumps

ksbpumps KSB Pumps - Pump division drives growth.

Result highlights:
KSB Pumps has reported a strong 31.4% improvement in its top line to Rs175.4 crore. The top line growth was primarily driven by a 46.9% rise in the pump revenues. However, the revenues of the valve division declined by 7.9% during the quarter but remained almost flat on a sequential comparison.

The operating profit margin (OPM) of the company has remained volatile over the last couple of years. On a segmental basis, the profit before interest and tax (PBIT) margin of the pump division declined by 270 basis points to 12.8% on account of a different mix of orders while that of the valve division declined by 410 basis points to 21% due to a slower top line growth. Consequently, the overall OPM of the company declined by 440 basis points year on year (yoy) to 15.8%. As a result, the operating profit for the quarter grew marginally by 2.7% to Rs27.7 crore. Slightly higher interest and depreciation costs led the company to report a 17.3% decline in its net profit to Rs16.2 crore.

Looking at its full year’s performance, the company has reported a 28.1% growth in its net sales while the OPM for the full year has marked an improvement of 260 basis points to 18%. Resultantly, the adjusted net profit grew by 40.5% to Rs64.7 crore.

The margins have softened in the current quarter, and the same are likely to remain lumpy on account of the change in the nature of orders executed in each quarter.Pump makers are likely to benefit mainly on account of the strong investments in the power sector, though there has been considerable slowdown in some of the other user segments, such as petrochemicals.

At the current market price, the stock is trading at 5.4x its CY2009E earnings and is available at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 3x. The valuations seem to be attractive considering the stock’s historic valuations. The stock also offers a healthy dividend yield of 2.74% due to which provides optimism on KSB Pumps.