Saturday, November 23, 2013

SHAKTI PUMPS (INDIA) LTD - BUY





In last one year or so Investors preference clearly changed in favor of export oriented businesses due to sharp fall in the value of Rupee. Conventional forex earners like IT and Pharma out performed during this period.But unfortunately ,investors in general ignored forex earning companies from other sectors and hence such companies still quoting at lower multiples even if their business improved due to rupee depreciation. This week let us look into one such company – Shakti Pumps.Shakti Pumps is India’s largest stainless steel submersible pump maker located at Pithampur Madhya Pradesh . Company is the first  five star rated pump manufacturer in India. In addition to submersible pumps ,company also producing Vertical Multistage Centrifugal pumps,Pressure booster pumps,Open well pumps,End suction pumps..etc. Recently company introduced pumps working with solar power.This product is expected to get strong support from government for rural irrigation purpose .A major chunk of company’s income coming from exports to various countries and export showing good growth over past few years.Now company is planning to extent its presence in all BRIC countries and European Union countries.Company having a sizable business in Indian market too and it planning to increase its dealer network by 3 fold in next few years.



                                                                            It is one of the fastest growing companies from this sector .From Rs.41 Cr sales in 2006 it reached a top line of Rs.210 Cr in 2013. Its export thrust and improvement in India’s rural economy is expected to drive further growth .Company is targeting a turnover of Rs.600 Cr in next three years.In the latest September quarter Company reported a jump of 50 % in its turnover and profit compared with last year’s same quarter.Pledging of shares by promoters is the only reason for some concern.But ,since its financial performance is improving quarter over quarter ,I don’t expect much issues from this angle.Moreover pledge is not with any NBFC but with one of its bankers - Axis Bank.Company having a dividend paying track record of past 8 years and issued bonus shares in the ratio of 1:1 in 2011.



Shakti  is expected to report an EPS of Rs.15 in this full year.At current market price of Rs.58 ,it is trading at a P/E multiple of below 4 . Recently company appointed film star Amitabh Bachchan as its brand ambassador ( Link to new TVC. HERE) .Considering management’s aggressive expansion in production capacity and marketing network, I believe company can deliver good growth in coming years. Recommending Shakti Pumps @ Rs.58 for investors with some risk appetite for medium to long term.Stock listed both in NSE and BSE


To view corporate film * , Link HERE

Link to latest AR HERE  

Link to company websites Link 1 , Link 2
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* Corporate film created by company itself ,hence claims may be biased

Disc: I have vested interest in Shakti Pumps.


48 comments :

  1. If I'm correct, You had already recommended this stock long back .. Why did you never mention that in this ? I know my comment would never get approved ..

    ReplyDelete
    Replies
    1. This stock once recommended few years back at a price 20 % below CMP .This recommendation is based on recent performance and company's future plans.

      Delete
  2. Dear VP,
    The promoters have converted 6 lac warrants at Rs. 166 per share ( Rs. 83 per share post bonus). Please correct me if I am wrong as I have just read the AR and found the same.
    Regards,
    Pratul

    ReplyDelete
    Replies
    1. Dear Lobo

      The mentioned shares are allotted to ML securities which is categorized as a non promoter entity in share holding pattern.But it is a point to note that this firm ( ML Sec) is a share holder since the beginning of the company and I strongly believe that this entity is associated with the promoters itself.Money raised by pledging promoter shares may be even used for subscribing these preference shares ..

      Delete
  3. Thanks for Sharing ... Your Guidance is very Valuable.
    Monday i will add this stock to my portfolio .
    Sir Please give a view on A2Z Maintenance and Engineering Services" i am making Loss 15% on this stock .. What about company . should i hold or book loss.

    ReplyDelete
    Replies
    1. A2Z does not have a focused approach in their business ,,so ...

      Delete
    2. So I Should EXIT .... THANKS

      Delete
    3. I doesn't mean like that, just expressed my opinion.

      Delete
  4. Dear Vp
    Please Advice about investment in Singer India Limited.

    ReplyDelete
  5. Sir

    Which is a preferred pick shakti pumps or ROTO Pumps (It has run up very sharply in last one month).

    Regards

    Shiv

    ReplyDelete
    Replies
    1. Roto pump recommended @ Rs.80 which is now @ Rs.147

      http://value-picks.blogspot.in/2010/04/roto-pumps-ltd-buy_12.html

      This stock now included in PCA too.

      Delete
  6. Sir,
    When a company gives bonus shares, say 1:1, shouldn't the value of the stock become half? I see this is true with Heritage Foods stock, but not with Acrysil or Shakti Pumps.

    Thanks,
    Sunil

    ReplyDelete
    Replies
    1. Hahaaa!
      1:1 Bonus, Stock Split are esseitially the pitfalls!
      Say, A you have a lot of 200 of Rs100 a piece, and the following possibilities arise:
      200 lot as it is worth: Rs20000
      After 1:1 Bonus, You will have 400 at Rs50 a piecem worth Rs20000
      After Stock Split of 1:1, You will have 400 at rs50 a piece worth Rs20000
      After a spock split of 1:1 and a bonus of 1:1, you will have 800 at Rs.25 each, worth Rs20000.
      It is for the convenience of the company so that more volumes are traded, and easy tu buy , but you wll gain nothing. So, the bottom line is never go near such states of a stock!
      Recently the same thing happend to CCLProducts.
      Am I Right Value.Pick?

      Delete
    2. Something wrong with your data .Acrysil gave bonus 1:2 and Shakthi's price came down proportionately on XB day.

      Delete
  7. Dear VP,

    What is your Views On Pankaj Polymers. As some turnaround story seems to be there

    ReplyDelete
    Replies
    1. I could not find any turnaround story in Pankaj which is showing few lakhs profit in past 5 years. More than that it is included in Periodic Call Auction.

      Delete
  8. Dear sir,
    This is the first time i am messaging you, i have 3 questions if you find time please answer sir, first of all Thanks for your valuable service, sir you recommended Britannia to hold, But the stock has corrected sharply & yesterday vinita bali sold some shares, still it is a hold for you or can you suggest some other IT names, sir my second question is your thoughts on Pfizer - Wyeth merger, third one is i want your views about Natco pharma.

    ReplyDelete
  9. When will the PCA period end for Simran Farms?

    ReplyDelete
  10. Sure will keep an eye on this for grabs.

    ReplyDelete
  11. dear VP,
    Kindly share your opinion on Gulf Oil, if any..

    regards

    vimal kumar

    ReplyDelete
  12. sir whats yr view on paushak ltd. .... i would like to add more ... is it right at 100+ to add more... hold 100 @ 80.

    ReplyDelete
    Replies
    1. Paushak recommended @ Rs.74 ( See below link)

      http://value-picks.blogspot.in/2011/03/paushak-ltd-from-group-of-alembic.html

      Later it shifted to periodic call auction. Company's business showing good improvement but I suspect the inclusion in PCA may affect the valuation of stock and possibly lower discounting.

      Delete
  13. Dear vpji
    pl advise for investment in eros media. stock is languishing even after several hit movies. Do you find any corporate governance issues or there's something wrong with the business model.

    ReplyDelete
    Replies
    1. Lowe than expected IPO price of Eros International Plc in US offering may be sentimentally a negative factor for EROS

      Delete
  14. Hello VP,

    Which is a better pick at CMP, Dabur, Britannia or Tata Global? I already have some ITC with me so want to buy 1 or 2 of these? Is there a better pick in FMCG other than these?

    Thanks,
    Tushar

    ReplyDelete
    Replies
    1. At CMP Tata Global is the preferred one .Entry through Mount Everest Mineral water is a good option since it is going to merge with Tata Global.( 3 shares of TGL for 4 shares of Mount everest)

      Delete
  15. Please Comment on your Past Recommendations like Vulcan Engineer,Anjani Portland Cements

    ReplyDelete
    Replies
    1. In the current business environment of the industries ( Engg and Cement ) is not favorable ,even on a revival these stocks may get less investor interest due the inclusion of both these stocks in Periodic Call Auction.

      Delete
  16. Dear VP,
    I dont know if you disapproved of my previous comment or not. But have you taken a look at P&G's "Tide Pods" which were introduced in the US last year? Monosol is the water soluble films supplier to P&G and is the world leader in WSF films. Don't you think such a technology could soon replace the sachet technology prevalent in India and thus directly benefit Arrow Coated Products.

    ReplyDelete
    Replies
    1. Yes , introduction of products in packets with capacity to dissolve in water is really increases the potential of cos like Arrow Coated.

      Delete
  17. VP ji,
    What do you think about Cummins india at current level is it good company to invest at current level ???

    ReplyDelete
    Replies
    1. Stock already recommended and no change in opinion.

      Delete
  18. Hi,
    Is wockhardt a good option for investment at current market price, I found 2 options for investment one is wockhardt & other one is biocon in pharma sector.
    Which one will be better???

    ReplyDelete
    Replies
    1. My stand on both stocks already mentioned ,use the search option.

      Delete
  19. wow..good to read all the posts..Sir, I have yes bank at 368, axis bank at 1090, tech Mahindra at 1320, colgate at 1260 and cipla at 393 , Kindly suggest if these are good stocks from a 1 -2 yrs investment period. I want to add tech Mahindra . please give me your view on what levels should I add ..thanx

    ReplyDelete
    Replies
    1. Companies are not bad but I am not a supporter of time bounded investment in stock market.

      Delete
  20. Vimta labs is rallying very fast. what is your opinion on this stock ?

    Boby paul , Bangalore

    ReplyDelete
    Replies
    1. Belgium based Eurofins group ,the world leading firm in testing and support services aggressively buying Vimta shares from open market.

      Delete
  21. Dear Vp ji,

    Thank u so much for your valuable comment

    Are you tracking small Cap stock KARUTURI GLOBAL

    ReplyDelete
  22. Hello sir,

    Please throw some light on Prime Focus and Everonn Education. What are your recommendations on these?

    Raj

    ReplyDelete
  23. Dear VP,

    Indonesia bauxite export ban to take effect from Jan 13, 2014.

    http://www.platts.com/latest-news/metals/singapore/indonesias-bauxite-export-ban-set-to-take-effect-27664677

    Acc. to me, this news is very beneficial to Ashapura Minechem. What are your views?

    Regards,

    Pratul

    ReplyDelete
  24. Hi sir,

    Some how my posts dont get displayed.
    Whats ur view on textile sector. seems like the stocks from this sector will be in limelight in some time.
    Whats ur view

    ReplyDelete
  25. wats ur suggestions hold vimta labs have bought at 30rs 3yrs ago..long term bet is good..

    ReplyDelete
  26. Amazing recommendation Mr. VP. It shot to 75+ an all time high today. Thanks for the call

    ReplyDelete
  27. Thanks boss.. This was the first tip I got after knowing about your blog.. It was trading around 60 and moved to 70 as on 28th Nov, I could enter at that level and today I have 15% profitl.. But I picked only 75 shares.. Is it good idea to accumulate more here ??

    ReplyDelete

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