Buy Shakti Pumps (India); target of Rs 651: Arihant Capital

Arihant Capital's research report on Shakti Pumps (India)

Shakti Pumps specialises in manufacturing a broad range of energy efficient stainless steel pumps (with special focus on solar pumps) catering to a variety of sectors including agricultural, industrial, domestic and horticultural. Given government’s thrust on solar pumps, Shakti having more than 50% market share in solar pumps, will be a key beneficiary of the increased demand for solar pumps. We expect Shakti to report 22.3% CAGR in its revenues over FY18-20E, while PAT will witness a CAGR of 32.5% over the same period. EBITDA margin is expected to stabilise around 17-18% level.

Outlook

We remain positive on Shakti’s future growth prospects, and initiate coverage on the stock with a BUY rating and a target price of Rs 651 (20x FY20E earnings), giving an upside potential of 52.8%.