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Monday, November 23, 2020

KSB Limited FV Rs 10 MNC value pick at cmp Rs 510-Rs 526 One year Target price Rs 700



 About KSB Group

KSB SE & Co. KGaA is a German multinational manufacturer of pumps, valves with headquarters in Frankenthal (Pfalz), Germany. The KSB Group has sales and marketing organisations, manufacturing facilities, and service operations on all continents. With sales revenue running to about 2.2 billion euros, the KSB Group is one of the leading suppliers of pumps, valves and systems. Worldwide, KSB employs more than 16,000 people KSB is an expert in pumps, valves and systems for building services, industry, water engineering, the energy sector and mining. As a global player, KSB provides services and produces complete hydraulic systems for the transport of water and waste water in all industries. KSB has been growing continuously since it was founded in 1871. Today the Group has a presence on all continents with its own sales and marketing companies, manufacturing facilities and service operations.


About KSB India

KSB Limited founded in the year 1960, is headquartered in Pune in the state of Maharashtra. To cater to the needs of the new and emerging India, KSB India has invested in world class facilities and technologies to cater to the demands centrifugal pumps and industrial valves across the Indian sub-continent. World class facilities in India are fully equipped to , design, test, fabricate and quality-assure on all aspects of fluid mechanics in India. KSB has plants in Pimpri, Chinchwad, Khandala, Vambori(Fondry division), Coimbatore and Sinnar 

Apart from the six manufacturing units, KSB in India has a very strong Marketing, Sales and Service setup to offer solutions to customers effectively.

About Business:

Global Pumps market is growing fast due to the increase in demand from the building and construction and oil and gas industry in addition to the mining industry over the past few years and also their wide uses in various industries. Furthermore, there is an increase in investments in developing economies due to rapid urbanization in the Asia Pacific and Latin American regions. Expenditure in the fixed investment allows manufacturers to expand and upgrade their production facilities, which involves the usage of pumps for several applications. This trend is projected to boost the product market to a large extent.

Applications:

Water :

Water Pumps market in India is witnessing an impressive rate of growth on the back of depleting ground water level, rapid urbanization, and various infrastructure initiatives launched with the purpose of improving infrastructure including construction of roads, homes, toilets, schools and cleaning of major water bodies such as the Ganges, Yamuna, etc. Agriculture accounts for a significant share in the country’s water pumps market. This demand is complemented by the industrial sector where power plants, chemical manufacturing and water & waste water treatment are the prime application areas. Rapid penetration of desalination plants in the industrial sector is expected to drive the demand for water-pumps in the segment. Water pumps are gaining demand in the power sector as well.

The demand for water-pumps is expected to increase due to the increasing need for industrial wastewater treatment. The increased infrastructural developments in the emerging nations could have a positive impact on the water-pumps market. The development of the industrial and agricultural sectors, could increase the demand for water-pumps sector. Moreover, the growing dependency on groundwater, instead of the monsoons, for irrigation and agricultural purposes in developing nations like India demonstrates an increase in the demand for water-pumps in the agricultural sector. Several global government initiatives for recycling of wastewater to reduce water pollution also indicates growth for water pumps Further, the Government has announced Nal se Jal scheme, which aims to provide piped water connection to every household by 2024, which in turn will increase the demand for water pumps in the country. Also, initiatives like Swachh Bharat Abhiyan and Namami Gange will drive the growth of the pumps market in India.

The Indian pump industry plays a very important role in almost every sphere including infrastructure and agriculture, which contributes significantly to the growth of the Indian economy. Rapid depletion of groundwater, increased use of solar pumps coupled with government-initiated projects, and rapid urbanization contribute to the exponential growth of the water pumps market in India. The water pump market in India is likely to cross USD 3.8 Billion by 2022. As the country moves towards urbanization, energy efficiency continues to be of importance, the solutions including intelligent water and wastewater management will witness increased demand, owing to initiatives like smart cities etc

Submersible Borewell Pumps

Domestic water Pumps

Stainless Steel & Solar Application Pumps

The solar water pumping systems market in India has the solar water pumping systems market in India has recorded a substantial growth in the last few years and is estimated to grow at a compound annual growth rate (CAGR) of more than 27 percent during 2018-2024. Indeed, support from the government of India to encourage the use of new and renewable energy has created a positive effect on the market. The National Solar Mission of India, an initiative by the government to promote solar energy, has set a target of achieving 100 GW of solar power by the year 2022. Some of the new government programs focusing on solar pumps and the agriculture sector are also helping to propel the growth in the sector. 

The solar water pumping systems market in India has recorded a substantial growth in the last few years and is estimated to grow at a compound annual growth rate (CAGR) of more than 27 percent during 2018-2024. Indeed, support from the government of India to encourage the use of new and renewable energy has created a positive effect on the market. The National Solar Mission of India, an initiative by the government to promote solar energy, has set a target of achieving 100 GW of solar power by the year 2022. Some of the new government programs focusing on solar pumps and the agriculture sector are also helping to propel the growth in the sector

Process industry

Extreme temperatures, high pressure and corrosio, KSB pumps & valves are engineered to withstand them all. Whether it means - transporting acids, lyes, rinsing water or sludge; sandy water, flue gas or other gaseous substances, hot water, heat transfer media or even foods and solids, or ensuring greater safety in dewatering and water logging operations. In fact, KSB handles almost all media that need moving in chemical, petrochemical or pharmaceutical industries, iron & steel, refineries, food processing units as well as mining industries and sand and gravel quarries.

Energy

The KSB range of high pressure Pumps and Valves supplies and circulates Boiler Feed Water, Condensate and Cooling Water to ensure high safety standards and cost efficiency under the toughest and most critical conditions. Our Primary Heat Transfer Pumps, Residual Heat Transfer Pumps, Primary Pressurizing Pumps, Main Boiler Feed Pumps, Multistage Condensate Extraction Pumps, Re- Heater Drain Pumps and Auxiliary Boiler Feed Pumps go about their business efficiency in thermal and nuclear power plants, refineries and offshore oil rings.

Oil & Gas

A wide range of efficient and environment friendly pumps and valves catering to the refinery and oil industries for Hydrocarbon pumping, boiler feed, condensate extraction, cooling water circulation and applications.

Construction

A wide range of efficient and environment friendly pumps and valves catering to the building services industry for drinking water supply, fire fighting systems, waste water disposal, air-conditioning and HVAC

















Key positive factors

1. Consistent performance already achieved revenue of 865crores with net profit of 61.8crores in nine months of FY-20(Company follows Jan-Dec FY)

2. ROE > 11%  ROCE > 15%

3. Market cap 1820 crores 

4. Promoters Holding approx 67%

5. At CMP of Rs 510 available at PE multiple of 18 cheap valuation looking at MNC status of Company

6. Consistent dividend paying company last year dividend 80%

7. No pledged shares.

8. Company almost debt free

9. Improvement in operating and NP margins 


Risk factors:

1. Recession in construction,infrastructure & agriculture sector could affect the performance of company.

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


Investment Rational: 

KSB a MNC company is available at attractive PE of approx 18 Stock after making low of 386 on 23rd March has moved up to 510 kind of levels.

Fundamentally strong company available at cheap valuation at PE multiple of approx 17-18.  FY20 nine month’s results are good and FY20 results are expected to be flat incomparision to FY-19.Interestingly company had exceptional gains in 2019 which were not available in 2020 inspite of this company has improved profitability. Company has recovered strongly from COVID disruption experienced in second qtr. FY20 Q-3 results were excellent improvement in margin is commandable.Q4 results are expected to be good as infrastructural/construction activities are getting normalized and in fact there is increase in demand seen. PE expansion from 18 to 23 as the market goes up this stock can touch Rs 700 in one year. Long term Investors may accumulate this stock  at every dip with a one year price target price of Rs 700 . 


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