29 January 2015

Master of fluid control… KSB Pumps (KSB), :: ICICI Securities, report

Please Share:: Bookmark and Share

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��
-->
Master of fluid control… We recently met the Director-Finance of KSB Pumps (KSB), Mr Verghese Oommen, to understand the domestic pumps industry and the company’s role in the entire supply chain. KSB, a subsidiary of KSB AG, Germany (world leader in pump manufacturing), is a pumps & valves manufacturer domestically based out of Pune, Maharashtra. The company has five manufacturing facilities spread across the country wherein it manufacturers pumps and valves. KSB clocked sales of | 733 crore in CY13, of which pumps constituted 82% (| 603 crore) while valves constituted 17% (| 122 crore). Domestically, KSB commands a market share of ~7% (pump sales of | 603 crore in CY13) out of the total industry size, which is pegged at ~| 8500 crore as of FY14. The company has 22 ware houses and 700 dealers spread across the country with strongholds in the agrarian states of Punjab and Haryana. KSB’s sales at the consolidated level have grown at a CAGR of 6.7% in CY09-13 to | 733 crore in CY13. The company clocked an EBITDA of | 101 crore (EBITDA margins 14%) in CY13 with corresponding PAT at | 67 crore. With an increasing focus on energy efficiency and uptick expected from the revival of domestic capex cycle due to thrust being given by the new government to augment domestic manufacturing, KSB is poised for a healthy growth journey ahead. Leader in high value, engineered Industrial segment In the pumps segment, KSB supplies ~35% of its pumps (sales of ~| 200 crore vis-à-vis market size of ~| 4000 crore, market share ~5%) in the standard pumps segment, which cater to the end users (irrigation and building services) using dealer based network. The standard pumps market is commoditised in nature and has many small & medium enterprises (SMEs) competing with large players. KSB supplies remaining 65% of its pumps (sales of ~| 400 crore vis-à-vis market size of ~| 4500 crore, market share ~9%) in the industrial segment, which is technology intensive and hard to penetrate by SMEs. On the industrial side, KSB is present across all industrial domains namely oil & gas, power, fertiliser & waste water treatment, renewable and nuclear energy among others. Strong parentage; lean balance sheet; quality play KSB has a strong parentage with KBS AG Germany, providing all R& D support and technical assistance. The company also possesses healthy balance sheet with net cash of | 157 crore in CY13. Among its large peers like Kirloskar brothers & CRI Pumps it enjoys strong EBITDA margins (~14% vis-à-vis large player’s margin of ~10%). The company also possesses lean working capital with net working capital days at 42 days in CY13. KSB is essentially a quality play with good management focus which will likely benefit with the revival of domestic capex cycle.

 Other management meet highlights • In the pumps segment, KSB is primarily a centrifugal pump manufacturer. • KSB’s sales are limited to Asia Pacific region unless roped in by its parent company i.e. KSB AG, Germany. • KSB possesses the widest product basket among all of its parent’s (KSB AG, Germany) subsidiaries outside Germany. • KSB is not present across the project/EPC business segment and is primarily a product (pump) manufacturer. The company does not intend to enter the EPC segment as it feels it does not have the requisite skills for the same. • The main raw material for manufacturing pumps at KSB is pig iron & steel castings, which constitutes ~35% of its sales. Raw materials constitute ~45-50% of its sales. • KSB supplies its own manufactured pumps in the sub-critical segment of power generation and can procure pumps catering to the super-critical segment of power generation from its parent if the need arises. • KSB’s royalty payment to the parent is dependent on the product type and is in the range of ~2-5% of sales depending upon the product being manufactured. • KSB has appointed one of its sister concerns as its sole commission agents for sale of its products in export markets, on which it pays ~10% of sales value as commission (authorised to pay up to 12.5% of sales). • In the valves business, KSB’s target is to improve profitability rather than chasing sales. The profitability is subdued in the valves segment on account of intense competition and a large fragmented market. • KSB can attain revenues amounting to ~| 1000 crore out of its current gross block (| 388 crore in CY13) and has no major capex plans in the pipeline. It intends to spend the amount equivalent to its depreciation as ongoing capex in its existing facilities • KSB is hopeful of achieving 15-20% CAGR in sales given the upturn in capex cycle materialises, going forward, but not at the expense of sacrificing margins and working capital.

LINK
http://content.icicidirect.com/mailimages/IDirect_KSBPumps_MgmtNote.pdf

No comments:

Post a Comment