KSB India: A bet on rural theme

KSB Pumps, a 40.5% subsidiary of the €2.2b German company KSB AG, is the 4th largest player in the Indian industrial pumps and valves business. KSB manufactures a wide range of pumps used in the power, oil & gas and other industries. KSB has 5 plants located in Pune, Nasik and Coimbatore, with a total manufacturing capacity of 150,500 pumps and 186,000 valves and 9,200 tonnes of castings (ferrous and non-ferrous).

KSB has incurred sizeable capex in FY16 and FY17 for setting up a new manufacturing facility.

KSB derives 80% of its revenues from pump segment and remaining 20% from valves segment. Metal components and castings account for 40% of its raw material costs.

Competitive Advantage:
– Relatively strong and establshed market position
– Wide range of products spanning entire pumps and industrial valves
– Technology transfer from parent KSB AG, Germany in return for royalty
– Backward integration into castings
– Efficient working capital cycle of 60 days

– Highly sensitive to commodity prices (ferrous and non-ferrous)
– Increasing competition from established local and MNC players
– Demand cyclicality

– Promoters hold 66.4% of the company
– Reliance Capital holds 8.4% of the company
– DSPBR MF hold 2.4% of the company
– Sundaram MF holds 1.5% of the company
– Thyssenkrupp India holds 3.1% of the company

On 09 May 18, Kenneth Andrade’s firm bought 3.8 lakh shares of KSB Pumps for ₹31.5 crore, or at ₹830 per share.

ICICI Direct values KSB at 35x P/E on CY19E EPS of ₹30.7 and assign a target price of ₹1080.



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