Buy KSB Pumps, target of Rs 451: Sharekhan

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Buy KSB Pumps, target of Rs 451: Sharekhan

Sharekhan has maintained its buy rating on KSB Pumps with a price target of Rs 451. KSB Pumps' Q1CY2008 results were slightly below research firm's expectation because of lower than expected margins and slightly lower other income.

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Sharekhan has maintained its buy rating on KSB Pumps with a price target of Rs 451 in its May 6, 2008 research report. "KSB Pumps' Q1CY2008 results were slightly below our expectation because of lower than expected margins and slightly lower other income. The net sales for the quarter rose by 20.5% to Rs 132.1 crore. The operating profit margin (OPM) remained stable on a year-on-year (y-o-y) basis at 16.1%, but the same declined by 300 basis points on a sequential comparison. On segmental basis, the profit before interest and tax (PBIT) margin of the pump division rose by 100 basis points to 12.4%, while that of the valve division declined by 140 basis points to 24.2%. The company plans to spend close to Rs 200 crore in the next four years towards capacity expansion and new product development. The capacity expansion is in line with the potential growth it sees in the pump and valves industry."

"The pump industry is set to benefit from huge investments being planned in the user industries, particularly power and petrochemicals. About Rs5 lakh crore is set to be spent towards power generation in the Eleventh five-year plan, out of which about Rs 5,000-7,500 crore is expected to flow towards the pump industry. In the refining space too, almost all the top players are expanding their capacities. KSB Pumps, enjoying a market share of 11-12%, should benefit from this expansion. We maintain our Buy recommendation on the stock with a price target of Rs 451," says Sharekhan's research report.

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