Buy Shakti Pumps India Ltd For Target Rs. 640 by Choice Institutional Equities Ltd
Expected Improvement in Realisation to Lift Margin
SKPI reported record quarterly revenue of INR 8,587 Mn driven by a 57.6% YoY increase in installations to 27,678 pumps. However, EBITDA margin of 9.6% marks a second consecutive print below 10% against 21.7% in H1FY26. Realisation per pump, elevated bought-out DCR module and steel cost, higher logistics and an adverse mix as exports slipped to 9.7% of revenue (FY26: 15.2%) affected EBITDAM. We continue to expect realisation to improve only after KUSUM 2.0 implementation, which we anticipate to come in by the end of Q2FY27E.
Valuation & View
Q1FY27 was a stable quarter with margin broadly in-line (+25bps vs. CIE estimate), we, therefore, maintain our earnings guidance for FY27E and FY28E as we await the official announcement of KUSUM 2.0. This would also bring in higher realisation and margin improvement. Our forecast builds Revenue / EBITDA / PAT CAGR of 19.4% / 25.2% / 25.1% over FY26–FY29E, respectively. We maintain our TP of 640 which was derived using DCF. Our TP implies a PE of ~24x on FY28E EPS of INR 26.2. Given an upside of 21.0%, we rate the stock as ‘BUY’.
KUSUM 2.0: Policy intent firms ahead of notification
We continue to project KUSUM 2.0 to be notified in Q2 FY27E. The scheme received its highest-level endorsement yet at the PM's July review meeting with Secretaries, where wider farmer adoption of PM-KUSUM was flagged as transformative for the agriculture sector. Near term, the 30th September 2026 commissioning deadline for Component B under the extended Phase-1 timeline, is expected to sustain execution intensity through Q2 FY27E. We anticipate more rational realisation, as prevailing benchmark cost barely cover elevated steel and module inputs, and the West Asia conflict propels the diesel-to-solar replacement impulse. Our earlier call on new market entry has played out, with Karnataka now 24% of the order book, while WB is yet to open.
QIP Monitoring Reports Utilisation and Timelines
INR 1,733 Mn of the INR 4,926 Mn raised across the March 2024 and July 2025 QIPs remains undeployed and is held in fixed deposits, as per the India Ratings monitoring agency report for the quarter ended June 2026. QIP 1: Cumulative utilisation stands at 54.3%, with the Pithampur capacityexpansion objective achieving 39.1% utilisation of the INR 1,500 Mn proposed. INR 130 Mn was deployed in this quarter. QIP 2: Utilisation is 72.0%, with the 2.2 GW DCR cell and module object at 63.7% utilisation of the INR-2,250 Mn proposal. Statutory approvals are recorded as "partly obtained" for both issues
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