This High Growth Sector (Related to Solar) Could Produce the Next Set of Multibagger Stocks in 2024

The Indian pump industry is one of the fastest-growing pump markets, given that the country is a major exporter of pumps in the world.

In recent years, the demand for pumps has increased across all market segments.

The government's focus on irrigation, sanitation, drinking water supply, and urban housing projects are the key factors driving the demand for pumps in the water segment.

Growing industrialisation and increasing capex across various user industries is also pushing the demand higher.

All this is driving the growth of the Indian pump industry, which is currently valued at US$ 930 million (m) (Rs 77.3 billion) and is expected to grow at a compound annual growth rate (CAGR) of 4.8% to reach US$ 1.19 billion (Rs 158 billion) by 2029.

Now, with India taking some serious efforts towards the solar sector, the demand is expected to hit the roof.

The government launched the PM KUSUM scheme to add solar capacity of 30,800 megawatt (MW) by 2026.

For this it plans to install small solar power plants, 2 million standalone solar powered agriculture pumps, and 1.5 million grid connected agriculture pumps.

Several Indian manufacturers are already benefiting from this scheme.

All in all, Indian pump manufacturing companies are set to benefit from this growth.

In this article, we'll look at the top companies that already have a leg up and could possibly benefit as the sector grows overall.

#1 Shakti Pumps

First on the list is Shakti Pumps.

The company is primarily engaged in manufacturing pumps, motors, and controllers.

The company has an extensive product portfolio of over 1,200 stock-keeping units (SKU) with a wide range of applications in several industries, including agriculture, building services, power, oil and gas, and mining.

It is a market leader in the solar pump market with a market share of around 30% in India and a primary beneficiary of the PM KUSUM scheme (Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan Yojana).

The company has two manufacturing units producing over 500,000 pumps per annum.

Shakti Pumps is also the only company with in-house manufacturing of an entire range of products, such as variable frequency drives, motors, and inventors for solar pump installation.

In the last five years, its revenue has grown at a compound annual growth rate (CAGR) of 12.2%, driven by volume growth led by a strong distribution network and a dominant presence in the solar pump market.

Its net profit saw a degrowth of 11.8% CAGR, primarily due to high raw material prices and intense competition.

Shakti Pumps Financials (2018-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue (Rs m)	5,474	3,869	9,334	11,847	9,709
Revenue Growth (%)		-29.3%	141.3%	26.9%	-18.0%
Net Profit (Rs m)	451	-141	756	648	241
Net Profit Margin (%)	8.3%	-3.7%	8.1%	5.5%	2.5%
Return on Equity (RoE)	15.5%	-5.3%	22.2%	16.5%	5.8%
Return on Capital Employed (RoCE)	25.0%	-0.3%	35.4%	24.4%	12.2%

Data Source: Equitymaster

However, the company's profit and margins have grown in the last three quarters. High order inflow, faster execution, and its focus on cost-cutting have led to a sharp rerating for Shakti Pumps.

Its order book as of December 2023 stood at Rs 22.5 billion (bn).

Shares of the company spiked big time after it recently announced blockbuster Q3 numbers.

It has announced growth plans to take advantage of the growing demand.

The company is expanding its capacity to 700,000 units per annum to foray into the electric vehicles (EV) segment.

It is also investing heavily in research and technology (R&D) and secured four new patents in the financial year 2024, taking the total patent count to 11.

To know more, checkout Shakti Pumps' financial factsheet and latest quarterly results.

#2 KSB

Second on the list is KSB.

With an extensive product portfolio of pumps, including standard industrial end suction, high-pressure multistage pumps, submersible motor pumps, monoblock pumps, and nuclear pumps, it serves water, energy, agriculture, construction, oil and gas, and process industries.

The company has an established presence in India with seven manufacturing facilities, four zonal offices, 14 branch offices, five service stations, 200 authorised service centres, and 1,000 authorised dealers in India.

It also has a market share of around 7.5% in the domestic pumps and valves industry.

In the last five years, the company's revenue has grown at a CAGR of 10.8%, driven by its leadership position in the energy, oil and gas, and nuclear (pumps) sectors in the domestic market.

The net profit grew at a CAGR of 20.6% on the back of cost optimisation measures, increased share of after-sale services, and high order inflow from customers.

As of September 2023, its order book stood at Rs 22 bn.

KSB Financials (2018-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue (Rs m)	11,131	13,155	12,371	15,310	18,641
Revenue Growth (%)		18.2%	-6.0%	23.8%	21.8%
Net Profit (Rs m)	716	1,007	938	1,494	1,827
Net Profit Margin (%)	6.6%	7.8%	7.8%	10.0%	10.0%
Return on Equity (RoE)	9.4%	12.2%	10.5%	14.8%	16.0%
Return on Capital Employed (RoCE)	14.9%	17.6%	18.0%	20.4%	22.0%

Data Source: Equitymaster

Its stellar financial results positively impacted its performance on the share market. In the last one year, its shares zoomed by 100%.

The company has moderate capex plans with a focus on expanding its product portfolio across petrochemical, water handling, and building services segments.

The company is also focussing on developing new hydraulics and sizes to cater to the market needs.

To know more, checkout KSB's financial factsheet and latest quarterly results.

#3 WPIL

Third on the list is WPIL.

The company is engaged in the entire value chain of pumps and pumping systems. It is involved in the commissioning and executing of water supply projects on a turnkey basis.

It also manufactures conventional and large water pumps and motors, which are used for irrigation, industrial, and municipal purposes.

The company has 12 manufacturing units across the world, with 5 in India and the rest in other countries such as South Africa, Australia, Zambia, Singapore, UAE, and Switzerland.

In the last five years, its revenue has grown at a CAGR of 9.1%, driven by higher volumes. The net profit also grew by a CAGR of 7% on the back of higher execution of turnkey projects.

It has a low debt-to-equity ratio of 0.1x and an interest coverage ratio of 13.6x, indicating low financial obligations and high liquidity.

WPIL Financials (2018-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue (Rs m)	11,771	9,242	10,139	11,941	18,196
Revenue Growth (%)		-21.5%	9.7%	17.8%	52.4%
Net Profit (Rs m)	1,566	527	761	1,180	2,200
Net Profit Margin (%)	13.5%	5.8%	7.6%	10.0%	12.3%
Return on Equity (RoE)	38.4%	11.6%	14.0%	18.6%	27.2%
Return on Capital Employed (RoCE)	54.7%	15.2%	18.7%	24.2%	35.5%

Data Source: Equitymaster

Its strong financial performance is also reflected in its performance on the bourses.

WPIL has a strong domestic order book of Rs 37.3 bn and an international order book of Rs 8.2 bn as of September 2023.

Being one of the leading players in the industry, WPIL continues to expand its operations in newer markets.

Moreover, it plans to diversify its portfolio to capture the growing demand for pumps in the domestic market.

The company is also investing heavily in research and development (R&D) to develop new products and new techniques to execute its turnkey projects.

To add to this, the government's Jal Jeevan Mission and Atal URBAN Renewal Mission 2 schemes will create a healthy demand for pumps in India over the next five years.

To know more, checkout WPIL's financial factsheet and latest quarterly results.

#4 Roto Pumps

Next on the list is Roto Pumps.

The company is a pioneer manufacturer of progressive cavity pumps in India. It also manufactures twin screw pumps, gear pumps, macerators, AODD pumps, and retrofit spare parts.

Its products offer reliable pumping solutions to diverse industries, including sugar, paper, paint, oil and gas, chemicals, renewable energy, mining, and defence.

The company has state-of-the-art manufacturing and research facilities allow it to innovate and develop new products to cater to new sectors.

In the last five years, its revenue has grown at a CAGR of 11%, driven by higher domestic and overseas sales.

Its net profit also grew by a CAGR of 15.4% despite a hike in steel prices.

Roto Pumps Financials (2018-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue (Rs m)	1,368	1,359	1,316	1,799	2,301
Revenue Growth (%)		-0.7%	-3.2%	36.7%	27.9%
Net Profit (Rs m)	162	116	183	302	331
Net Profit Margin (%)	12.0%	8.8%	14.5%	17.2%	14.7%
Return on Equity (RoE)	20.8%	13.3%	17.7%	22.5%	20.4%
Return on Capital Employed (RoCE)	31.3%	20.8%	25.8%	32.2%	30.3%

Data Source: Equitymaster

Good performance has trickled down to returns as can be seen from the chart below.

Roto Pumps is focussing on reducing costs and improving profitability. It is implementing SAP software to cut costs and manage inventory efficiently.

The company is also investing in R&D to develop new products and cut the life cycle costs of products.

Given the company's long-established presence in the industry, its efforts will drive revenue and profit growth in the medium term.

To know more, checkout Roto Pumps' financial factsheet and latest quarterly results.

#5 Latteys Industries

Last on the list is Latteys Industries.

The company is engaged in the business of manufacturing submersible pumps and motors.

It has a portfolio of over 1,200 pumps that are useful for domestic, agricultural, horticultural, and industrial purposes.

With a manufacturing capacity of 120 thousand pumps per annum, the company caters to Indian and international markets.

In the last five years, its revenue has grown at a CAGR of 14.4%, driven by higher volumes. The net profit also grew by a CAGR of 10.2% during the same period.

It has a debt-to-equity ratio of 0.1x with an interest coverage ratio of 2.4x.

Latteys Industries Financials (2018-2023)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue (Rs m)	274	249	278	414	538
Revenue Growth (%)		-9.1%	11.6%	48.9%	30.0%
Net Profit (Rs m)	8	4	5	10	13
Net Profit Margin (%)	2.9%	1.7%	1.9%	2.5%	2.5%
Return on Equity (RoE)	5.8%	3.0%	3.5%	6.7%	7.8%
Return on Capital Employed (RoCE)	13.4%	11.4%	11.8%	14.9%	17.4%

Data Source: Equitymaster

The company's shares migrated from the NSE Emerge platform to the main board of NSE in May 2023. Ever since its listing, the shares have fallen by 45%, primarily due to a fall in profits driven by high raw material prices.

Given the rapid growth in the construction and manufacturing sectors, the demand for pumps is expected to go up.

Since the company is primarily into manufacturing pumps, there is a significant growth opportunity.

To further diversify its revenue, the company also ventured into manufacturing EV charging stations, electric garbage vans and LED lights.

All this can help the company grow its revenue and profits in the medium term.

To know more, checkout Latteys Industries' financial factsheet and latest quarterly results.

List of Other Pump Manufacturers in India

Apart from the above, here are other companies which primarily focus on pump manufacturing -

Company Name	Revenue Growth (5-year CAGR %)	Profit Growth (5-year CAGR %)	RoE (%)	RoCE (%)
Dynamatic Technologies	-3.80%	9.30%	7.90%	16.00%
Yuken India	1.70%	-39.70%	4.80%	12.10%
Veljan Denison	6.70%	0.40%	8.70%	12.10%
Jyoti	-1.10%	-196.10%	-7.20%	8.40%
Ameya Precision Engineers	5.70%	1.10%	9.50%	13.00%
Bright Solar	-16.10%	-46.60%	0.20%	0.30%

Data Source: Equitymaster

Although the sector is witnessing high growth, it is important to treat these stocks with the same amount of caution as other stocks.

Track pump stocks closely and keep a watch on their developments.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...