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KSB Pumps: Valves segment leads the way - Views on News from Equitymaster

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KSB Pumps: Valves segment leads the way

Aug 3, 2010

KSB Pumps declared its 2QCY10 results. The company has reported 9% YoY growth in sales while its net profits have fallen 8.3% year on year. Here is our analysis of the results.

Performance summary
  • Sales grow by 9% YoY during 2QCY10 (December ending fiscal). Growth during the quarter led by the valves segment which saw sales grow by 54% YoY.
  • Operating margins contract by 4.9% YoY during the quarter on the back of a rise in raw material costs as also the cost of traded goods (all as a percentage of sales).
  • Net profits fall by 8.3% YoY during the quarter, with contraction in operating margins and a rise in depreciation costs being the main reasons for this.

Financial performance snapshot
(Rs m) 2QCY09 2QCY10 Change 1HCY09 1HCY10 Change
Sales 1,383 1,505 8.9% 2,725 2,881 5.7%
Expenditure 1,129 1,303 15.4% 2,245 2,472 10.1%
Operating profit (EBDITA) 254 203 -20.3% 480 409 -14.7%
Operating profit margin (%) 18.4% 13.5%   17.6% 14.2%  
Other income 44 70 58.0% 68 92 36.5%
Interest 8 1 -88.5% 14 3 -81.3%
Depreciation 42 52 22.0% 82 100 21.8%
Profit before tax 248 220 -11.5% 451 399 -11.5%
Tax 75 61 -18.7% 143 123 -14.0%
Profit after tax/(loss) 173 159 -8.3% 308 276 -10.4%
Net profit margin (%) 12.5% 10.5%   11.3% 9.6%  
No. of shares       17.4 17.4  
Diluted earnings per share (Rs)*         36.2  
P/E ratio (x)*         15.5  
* On a trailing 12 months basis

What has driven performance in 2QCY10?
  • KSP Pumps witnessed its net sales growth by 9% YoY during 2QCY10. This was led by the company's valves business which reported a growth of 54% YoY. The pumps segment on the other hand, which contributed to almost 79% of the company’s topline during the quarter saw a more modest sales growth of 3% YoY.

  • KSB’s operating margins contracted by 4.9% during 2QCY10. This fall was due to higher raw material costs, employee costs and higher cost of traded goods. Based on segments, it was the pump segment that saw a drastic fall in margins during the quarter from 18% EBIT margins during 2QCY09 to 13.3% in 2QCY10. The valve segment though saw a 0.5% expansion in EBIT margins during this same period.

  • On the back of the fall in operating margins and higher depreciation expenses, KSB recorded an 8.3% YoY fall in its bottomline during 2QCY10.

What to expect?
At the current price of Rs 561, the stock is trading at a multiple of 9.2 times our estimated CY12 earnings. We have a positive view on the stock at current levels.

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Feb 18, 2019 (Close)


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