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Thursday, November 22, 2012

Shakti Pumps Stock Analysis: Growth Stocks!

Shakti Pumps is one of those growth stocks, for which the saying goes, Buy High and Sell Higher. The scrip has doubled from the lows of 29.75 where it was trading in the beginning of 2012 and there is a long way Shakti Pumps can travel from here.

Shakti Pumps manufactures submersible pumps, motors and application pumps for a wide range of industrial and agricultural applications. Shakti is among the few companies in the world to produce 100% stainless steel submersible pumps and motors. The firm differentiates itself by energy efficiency of their pumps and has 5-star energy ratings for several of their pump models.

Shakti has manufacturing facilities with an installed capacity base of 1 million pumps per annum and is located in Pithampur, MP, India. Shakti is also one of the leading pump exporters in addition to being a major player in domestic Indian market. About half of their revenues are derived from their export business. Shakti is opening new manufacturing units in Pithampur SEZ as well and if you visit their website, you will notice they are actively participating in various Trade Shows globally, which is a sign of an aggressive and smart marketing firm.

Looking at financials, Shakti has doubled their revenues in past 5 years from Rs 104 crores in 2008 to Rs 195 crores in year ending 2012. EPS for year ending 2012 is at Rs 10.65 per share. For the quarter ending Sep, 12, firm has topline of Rs 52 crores and EPS of Rs 3.14 per share.

Looking at ratios, at today’s share price of Rs 64.5 per share, firm is trading at a total market cap of Rs 99 crores, which is just about half of their topline revenue number for year 2012. P/E ratio is also at a reasonable 6.15 and firm is trading close to its Book Value of Rs 59.6.

Thus even though firm has doubled in share price in past year, there is still a long way where the price can go in a supportive market environment. Dividend payout is consistent and is at 10% its face value and about 1.5% of its current market price.

One additional Good thing is high promoter holding at about 49%. Pls see the shareholding breakup above.

Looking at the chart patterns, Shakti Pumps share price has hit highs of Rs 170 in heydays of 2010 when midcaps and smallcaps had a dream run. (Attached Chart is not adjusted for 1:1 bonus share in Apr,11). Support levels are at 43 and 36 and next resistance levels are at 70 and at 103. Price is already nearing 70, so in short term there might be a price pullback, and investors need to slowly sip in this scrip at lower levels and aim for profit booking near 100-103 price range.

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