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Sharekhan Advises Buying This Debt Free Stock, Company Recorded Highest Order Intake At Rs.500 Crore
Brokerage firm Sharekhan recommends investors to buy the stocks of KSB Ltd. The company has witnessed the highest-ever quarterly order intake of around Rs. 500 crore (up 30% y-o-y) in Q1CY2022.
Target Price, Current Market Price, and Company Performance
The Current Market Price (CMP) of KSB Ltd. is Rs. 1,356. Sharekhan has estimated a Target Price for the stock at Rs. 1559-1600. The stock has potential to give a 15-18% return, in the upcoming 1 year. This is a small-cap company with a market capitalization of around Rs. 4,734 crore.
| Stock Outlook | |
|---|---|
| Current Market Price (CMP) | Rs. 1,356 |
| Target Price | Rs. 1559-1600 |
| Potential 1 year return | 15-18% |
| 52 week high share price | Rs. 1,523.15 |
| 52 week low share price | Rs. 913.00 |
The company's revenue in CY21 was recorded at Rs. 1,497 crore, which is expected to be at Rs. 1,760 crore in CY22. Their adj PAT in CY21 stood at Rs. 149 crore, which is expected to be at Rs. 170 crore in CY22. The company's OPM in CY21 was recorded at 14%, which is expected to be at 13.7% in CY22.
Export orders were up 54% y-o-y compared to Q1CY2021. Growth was led by strong order intake in oil and gas, agriculture, petrochemical, chemical, and water and wastewater segments. KSB expects 15% y-o-y growth in order inflows in CY2022 (Rs. 1,500 crore in CY2021), driven by both domestic and export markets.
Sharekhan comments: stock advantages and risks
NPCIL order and FGD pumps are key long-term growth triggers for the company, the first order of Rs. 400 crore at Gorakhpur, Haryana, from Nuclear Power Corporation of India Limited (NPCIL) has been finalized. Therefore, the company has an opportunity of Rs. 3,000 crore in the long term. Additionally, the company incurred a capex of Euro 104 million in CY2021, 16% of which was spent in Asia-Pacific. The highest amount was invested in US, India, and China plants.
"We are upbeat on KSB's future growth trajectory as it is deploying multiple levers for the next leg of growth. The company is debt-free, has strong cash and bank balance, and has a short working capital cycle. It is concentrating on building its competitiveness by diversifying its product portfolio, seeking export opportunities, and tapping the potential of the large spares and services market for its products. Therefore, we expect the company's revenue/PAT to post a CAGR of ~17%/21% over CY2021-CY2023E. By CY2024, the company aims to achieve an order intake/revenue of Rs. 2,500/Rs. 2,200 crore. We believe KSB is a formidable bet on the short to medium-cycle pumps and valves industry in the small to mid-cap space," Sharekhan stated.
Company profile: KSB Limited
KSB Limited (KSB), a leading player in the domestic pumps and valves industry, is on the cusp of a leap towards higher growth through its multi-pronged strategy. The company is expediting efforts to emerge as a leading MNC player in the sector. The technological support from its German parent - KSB SE. & Co. KGaA - provides the company an edge over competitors. In 2021, KSB paid a royalty of ~Rs. 22 crore (1.45% of revenue) to its parent in exchange for technical know-how. Following its parent's growth strategy, KSB plans to grow its spare parts as well as after-market and services business under 'SupremeServ', which currently contributes 11-12% (as compared to ~32% of its parent's CY2021 revenue) to total revenue. company's products cater to various industries such as oil and gas, irrigation, water treatment, energy, capital goods as well as a nuclear power.
Disclaimer
The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
