Buy KSB Pumps; target of Rs 651:Prabhudas Lilladher

Prabhudas Lilladher's reserach report on KSB PumpsKSB reported sales at Rs1.8 bn, down by 6.6% YoY (PLe: Rs2.12bn). Sales for Pumps segment were down by 7.1% YoY to Rs1.5 Bn while sales for Valves segment were down by 7.5% YoY to Rs 303Mn.EBITDA was up by 7.8% YoY at Rs291 Mn (PLe: Rs238 Mn),EBITDA margins were up by 210bps YoY to 15.7% (PLe: 11.2%). Gross Margins were up by 250bps YoY to 57.5%. Lower commodity prices and favourable mix helped improve margins. Other income was down 46% YoY to Rs43m. PAT for the quarter was down 6% YoY to Rs169m (PLe: Rs147m).The stock is trading at 28x CY16E earnings. KSB has a strong product portfolio and is a dominant market player. The company should benefit from expected pick‐up in Power and Oil & Gas capex and increased focus on Water & Irrigation capex by the government. The market movement towards energy‐efficient pumps should help organized players and benefit the company. Strong balance sheet and cash flow provides additional comfort. We maintain ‘BUY’ on the stock.

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