Jitendra Kumar Gupta Moneycontrol Research
Since the time Moneycontrol Research initiated coverage on the stock in May 2017, Shakti Pumps’s stock price has gone up by close to 30 percent. It is now getting much more fan following in the investors circle with promoters guiding to good growth.
Recently, ace midcap fund manager Kenneth Andrade bought shares at around Rs 476 a share. The long-term investment arguments remain intact and the company continues to deliver on expectations largely led by growth in solar pumps on the back of policy initiatives.
This is also reflected in its financial performance. During Q1FY18, Shakti Pumps reported 152 percent year-on-year increase in net profits driven by higher sales and lower cost as a result of improving capacity utilisations.
The company reported 17 percent increase in sales to Rs 89 crore, but expenses rose by 14 percent leading to 43 percent increase in operating profit to Rs 13 crore and 300 basis points improvement in the operating margins to 15 percent.
With strong demand for solar pumps and under-utilised manufacturing capacities, we expect that revenue growth and profitability could remain buoyant in the coming years along with the further scope for expansion in margins.
However, part of the expectations has been captured in the stock rally. At the current market price of Rs 492 a share, the stock is trading at 20 times FY18 projected earnings. Investors have to look for an opportunity to add this stock in decline.
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