Roto Pumps Limited INE535D01029 : FV Rs 2: Indian MNC a value pick at CMP of Rs 85-87

   

Pumps are integral part of processing industry and find variety of application from initial to final stage of different processes involved in fluid transportation in the diversified industries. Any addition, expansion would require installation of pumps which are subject to wear tear hence requires, preventive, predictive and breakdown maintenance and replacement of wear tear spare parts and service support.

Established in 1968, Roto Pumps is the pioneer manufacturer of Progressive Cavity Pumps in India, renowned for providing efficient and reliable pumping solutions to a diverse range of industries including Wastewater, Sugar, Paper, Paint, Oil & Gas, Chemicals & Process, Ceramics, Food & Beverages, Renewable Energy & Power, Mining & Explosives, Marine & Defense and many more. Beside this, its core strength lies in focused R&D, and robust marketing, service and a sales network spanning 5 continents. A globally preferred brand in positive displacement pumps, with its state of the art manufacturing unit based at Greater Noida, India & Ultra modern R&D centre based at Noida, India. Roto Pumps is successfully exporting to more than 50 countries.

Roto Pumps is ambitiously working towards its expansion by strengthening the strategic global partnerships, establishing new branches & subsidiaries across continents and aims to be among the top 5 positive displacement pump manufacturers with a presence in 100+ countries.

Roto Pump's ability to design, manufacture and deliver best suitable Retrofit Spare Parts for all the major PCP brands provides a significant advantage. Company has put a plan to embark upon a high growth trajectory of CAGR of 15% to 20% in next 5 year despite the perceived global economic challenges. Sales from Australia and UK region has been growing more than 20%. Strong focus on customer service to maximize the operational life of their existing pumps at a fraction of cost and assures minimum disruption in operations and help them to reduce their cost of ownership is biggest strength of the company. Revenue from exports constitutes around 67% of the total revenue from operations. Spare parts and service sales constitutes approx 52% of total revenue which is a strong indicator of customer loyalty and also sale of spares commands higher margin

         

	13-14	14-15	15-16	16-17	17-18	18-19	19-20e
Sales	89.59	93.69	96.57	100.88	113.92	135.04	148.00
Expenses	71.32	76.46	83.75	81.96	92.25	105.46	115.00
Operating Profit	18.27	17.23	12.82	18.92	21.67	29.58	33.00
Other Income	0.62	-0.06	0.26	0.67	1.23	1.79	2.58
Depreciation	2.80	4.84	7.69	7.39	7.03	7.48	7.06
Interest	1.45	2.23	3.18	3.17	2.71	2.54	2.19
Profit before tax	14.64	10.10	2.21	9.03	13.16	21.35	26.33
Tax	5.06	4.22	1.82	3.76	4.78	5.18	-6.57
Net profit	9.59	5.41	0.64	5.35	8.57	15.98	19.76
EPS	6.19	3.49	0.41	3.45	5.53	10.31	12.77

                                 

 

Key positive factors:

1. Consistent performance already achieved revenue of 105 crores with net profit of 11.62crores in            FY-19-20(NINE MONTHS)

2. ROE > 22%  ROCE > 24%

3. Market cap 136 crores 

4. Promoters Holding approx 70%

5. At CMP of Rs87 available at PE multiple of 6.9 cheap valuation 

6. Consistent dividend paying company last year dividend 80%

7. No pledged shares.

8. Company has been reducing Debt 

9. Improvement in operating and NP margins

Risk factors:

1. Recession in industrial output and increase in raw material cost could affect the profitability.

2. Lower global and local demand due to COVID /Lockdowns could affect the financial performance.

Investment Rational: 

Technically Stock after making low of 63 on 23rd March has moved up.

Fundamentally strong company available at cheap valuation at PE multiple of approx 7.  FY19-20 nine months’ results are excellent and FY results are expected to be on expected lines. Margin improvements could result in increase in EPS  of 12-13 in FY 19-20. PE expansion as the market goes up this stock can touch 120 in one year. Long term  Investors may accumulate this stock  with a one year price target price of 120 .If company could grow at targeted growth of 15-20% which looks quite possible the stock has good potential to touch 200 in 2-3 years.