Buy Kirloskar Brothers: Way2Wealth

Way2Wealth is bullish on Kirloskar Brothers and has recommended buy rating on the stock in its November 20, 2012 research report.

“Kirloskar Brothers Limited (KBL), a multinational Indian company, incorporated in 1920 with over 123 years of engineering expertise in Fluid Management Systems, is one of the largest pump manufacturing and exporting company in India with focused areas in Irrigation, Water Resource Management, Building and Construction, Industry, Power, Gas, Oil and Defense.”

“The global market for pumps is expected to grow at an average CAGR of 2.8% from 2005-2015. The Indian pump industry is poised to register a faster growth rate than global average, ~increasing its share of global market from 2.9% in 2005 to 4.4% in 2015. With a 15% market share in the pumps sector & exports contributing to 19% of its revenues in FY12, KBL would be garnering stable growth in the near future. KBL has launched the Manthan Initiative whereby it will focus on its core competent product business of centrifugal pumps & valves & strengthen it further rather than focus on its EPC business. Its consolidated product business sales have increased from 62% to 69% in FY12 with focus on positive cash generation for KBL. KBL has embarked on a mission to clean up its balance sheet & generate positive cash flows by dispatching its products to customers who have the capacity to pay. Selective bidding for new projects has been made with strong filtrations of being profitable & cash positive. KBL plans to merge or dispose off its loss making subsidiary Kirloskar Constructions & Engineers Ltd. which have consistently eroded its consolidated profits since its acquisition in 2007 (25% of consolidated PAT in FY12). An affirmative resolution hiving off or merging KCEL will positively impact the consolidated profitability of KBL.”

“Stable growth in the pump sector from the water, chemical & maintenance segment, restructuring of its business verticals, cleaning up of its balance sheet, we find KBL to be an interesting value pick with key change in its revenue mix from project to product. At the CMP of Rs.148, the stock quotes at a PE of 11x its FY14E EPS of Rs.14 per share. We initiate coverage with a BUY rating on the stock,” says Way2Wealth research report.  

FIIs holding more than 30% in Indian cos

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