Buy KSB Pumps, says Avinash Gorakshakar

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Buy KSB Pumps, says Avinash Gorakshakar

Buy KSB Pumps, says Avinash Gorakshakar, Anagram Capital.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See previous views by Avinash Gorakshakar See what other Experts & Brokerages are saying about KSB Pumps See messages about KSB Pumps KSB Pumps BSE | NSE 30/05/12 Are Mutual Funds betting on KSB Pumps?

Buy KSB Pumps , says Avinash Gorakshakar , Anagram Capital.

Gorakshakar told CNBC-TV18, "KSB Pumps is an MNC play in the capital goods space. Typically, this is a reasonably medium-sized company, which makes industrial pumps and industrial valves. We like the company primarily because the company's capital structure and business model is extremely strong. Infact in terms of return ratios, the company has been throwing extremely strong numbers; the RoC (return on capital) for KSB Pumps for December '09, which was the last completed financial year, was in excess of 30%. The return on equity was about 20%."

He further added, "The company recorded a turnover of close to about Rs 550-560 crore with a bottom-line of roughly about Rs 70 crore. So they had a reasonably good healthy net margin of around 12-12.5% on a small equity of Rs 17 crore. On an EPS (earning per share) of Rs 40 roughly last year, the stock trades at half multiple of roughly about 13 times, this is quite cheap compared to looking at the MNC status of the company and debt free status."

"We feel that this year would be a kind of a big leg-up year and there could be significant traction in the top-line as well as margins, considering the sharp improvement in the IIP (index of industrial production) numbers as well as the corporate capex spending numbers. So we have been recommending clients and telling them to accumulate the stock at every decline, even at the current level at around Rs 550. This company could also be a delisting candidate. We expect that within a year the stock can touch a price of Rs 650-675. We have a buy on the stock."