This Under-the-Radar Solar Pump Stock Is Up 47% in 2024: Time to Buy?

The promise of implementing clean energy sources across India was that solar, wind, and other renewable energy sources would rule the day.

The story was India combating climate change to become net-zero emission country in the coming decades from the third-largest emitter currently.

The ambitious target was set to fully capture the potential of the green revolution.

And the launch of solar rooftop scheme in 2024 marked the creation of the first mass market belief that the transition is actually happening.

Stocks manufacturing solar panels boomed within days... such was the sentiment surrounding solar stocks.

In fact, this even had a multiplier effect on the solar pump industry.

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.

Safe to say that solar pump stocks are set to benefit from this growth.

And the prospect of exponential growth offers investors a great opportunity to ride the solar megatrend with the help of this under-the-radar solar pump stock.

Ingersoll Rand: Aiming for the Sun Alongside India's Solar Boom

An industrial air compressor company supplying to auto, pharma, metal, and various other sectors, this stock is a direct beneficiary of the growing momentum in the solar pump industry.

Ingersoll Rand manufactures air compressors of various capacities for the domestic and export markets.

It derives revenue from the sale of reciprocating, rotary and centrifugal compressors and spares in the domestic market, and from export to its parent and affiliates.

According to the company's website, it offers a range of pumps including gear pumps, industrial process, magnetically coupled and lubrication pumps.

It has a market share of over 45% in the centrifugal compressor segment.

Some of its brands include NASH, CompAir, Ingersoll Rand, Gardner Denver, ARO, Thomas, Milton Roy, and EMCO Wheaton.

Over the years, the company has received critical support from its parent. The parent company provides Ingersoll Rand India with technological support and in turn procures compressor requirements from India.

A Close Look at its Financials

Ingersoll Rand has remained a debt free company over the years.

It has also paid big dividends time and again. (Special dividends in FY19 and a big payout in FY23 as the company completed 100 years.)

However, growth remained a challenge as its revenue remained in the same range for years owing to strong competition from peers.

Nevertheless, despite pricing pressure arising from the competitive market, Ingersoll Rand has tripled its profit between 2019-2023.

FY24 could be its best year in terms of profit, as the first three quarters have shown progressive growth across business verticals.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	7,391	7,056	6,177	9,099	11,508
Growth (%)	20%	-5%	-12%	47%	26%
Operating Profit	1,393	1,349	1,237	1,650	2,650
OPM (%)	19%	19%	20%	18%	23%
Net Profit	809	846	724	1,101	1,826
Net Margin (%)	11%	12%	12%	12%	16%
ROE (%)	10.5	21.3	17.6	22.0	32.4
ROCE (%)	16.5	29.2	26.3	30.1	44.0
Dividend (Rs)	6.0	28.0	3.0	20.0	50.0
Debt to Equity (x)	0.0	0.0	0.0	0.0	0.0

Data Source: Ace Equity

The company is slated to announce its results for the quarter and full year ended March 2024 today.

What Next?

The Indian government's focus on solar, irrigation, sanitation, drinking water supply, and urban housing projects are some of the key factors that could drive the demand for pumps and compressors.

Growing industrialisation and increasing capex across various user industries could also push demand higher.

To meet the rising demand, Ingersoll Rand is already setting up a new manufacturing plant in Gujarat to increase its manufacturing capacity of air compressors by 5,000 units per month.

According to the management, this plant is expected to be operational post the second half of FY25.

Share price of the company has come under pressure in recent trading sessions after its parent company reported muted results, hurt by lower demand for its air compressors and other products.

Nevertheless, with India taking serious efforts towards the solar sector, the demand for compressors and solar pumps is expected to hit the roof.

A word of caution... given that the pump and pump compressor industries are highly cyclical, the major players involved in the industry are open to risks such as dependency on sectors they supply to.

It remains to be seen how Ingersoll Rand performs in the fourth quarter and whether it declared a big dividend payout like last time.

Watch this space for more!

How Ingersoll Rand Share Price has Performed Recently

In the past 5 days, Ingersoll Rand share price has fallen around 6%.

In 2024 so far, the stock price is up 47%.

Ingersoll Rand has a 52-week high of Rs 4,998 touched on 22 May 2024 and a 52-week low of Rs 2,678 touched on 29 May 2023.

In the past 1 year, Ingersoll Rand share price is up 70%.

Here's a table comparing Ingersoll Rand with its peers -

Comparative Analysis

Company	Ingersoll Rand	Dynamatic Tech	Kirloskar Pneumatic	Shakti Pumps	WPIL
ROE (%)	32.4	6.6	15.1	6.8	24.2
ROCE (%)	44.1	10.9	19.9	10.9	32.1
Latest EPS (Rs)	71.5	60.5	20.6	58.5	145.3
TTM PE (x)	63.4	130.4	53.4	44.9	26.8
TTM Price to book (x)	21.2	9.9	7.8	7.8	5.1
Dividend yield (%)	1.1	0.1	0.6	0.2	1.1
Industry PE	59.8
Industry PB	11.1

Data Source: Ace Equity, Equitymaster

Since you're interested in solar sector stocks, also check out Equitymaster's stock screener which has a separate section for solar -

• Best Solar Energy Stocks in India 2024
• Multibagger Solar Stocks
• Best Solar Pump Stocks in India

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...