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KSB Pumps: Subdued quarter - Views on News from Equitymaster
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KSB Pumps: Subdued quarter
Apr 22, 2009

Performance summary
  • Topline grew by a muted 1.6% YoY in 1QCY09, largely on the back of revenues from pipeline projects.
  • Operating profits grew by 6% YoY on account of softening of commodity prices like steel and increased focus on high margin project based revenues.
  • Bottomline growth comes in at 5% YoY as higher interest and depreciation charges take some sheen off the operating performance.


Financial performance snapshot
(Rs m) 1QCY08 1QCY09 Change
Net sales 1,321 1,342 1.6%
Expenditure 1,108 1,117 0.8%
Operating profit (EBITDA) 213 225 5.9%
EBITDA margin 16.1% 16.8%
Other income 19 24 27.6%
Interest 3 7 94.1%
Depreciation 29 40 37.6%
Profit before tax/(loss) 199 202 1.8%
Tax 70 67 -4.1%
Net profit 129 135 5.0%
Net profit margin 9.8% 10.1%
No of shares (m) 17.4 17.4
Diluted EPS (Rs)* 37.6
P/E (times) 6.4
*trailing twelve month earnings

What has driven performance in 1QCY09?
  • KSB Pumps, a leading pump and valve manufacturing company, has reported 1.6% YoY growth in topline during 1QCY09 largely on the back of revenues from pipeline projects. The company’s 60% of the revenues are accounted by project based revenues. The growth of the sector and the company is dependent upon end user industries like energy and power. Slowing economic growth has led to deferment of expansion plans of end user industries. The same seemed to have resulted in slower growth in topline.

  • However, going forward, the growth is expected to come in on account of government’s increased investments in industrial sector and increased investments in agricultural sector as the year gone by has been a good crop year.

    Cost break up
    (as a % of sales) 1QCY08 1QCY09
    Consumption of raw materials 50.3% 46.5%
    Staff cost 13.6% 14.9%
    Other expenditure 20.1% 21.8%

  • Operating profits have grown by 6% YoY during the quarter. The growth has largely come in on account of ability to contain growth in cost of operation. The improved revenue mix in favour of high margin products and softening of steel prices that decide the cost of key inputs such as castings and forgings has enabled the company to expand margins.

  • Despite operating profits reporting 6% YoY growth, profit before tax (PBT) has grown merely by 1.8% YoY on account of higher finance charges and depreciation costs. Had not the other income grown by 28% YoY, PBT growth would have been even lower.

  • Net profits have grown by 5% YoY. The bottomline has outpaced growth in PBT on account of lower tax outgo.

What to expect?
At the current price of Rs 242, the stock is trading at price to earnings multiple of 4.5 times our estimated CY11 earnings. We maintain our view on the stock from a long term perspective.

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