Buy Shakti Pumps India Ltd for the Target Rs. 931 by ARETE Securities Ltd
Shakti Pumps delivered a resilient Q2FY26 performance amid seasonal headwinds, supported by strong execution in KUSUM schemes, and continued traction in retail and exports. While revenue growth was moderate due to extended monsoon and state level delays, profitability remained robust with EBITDA margins above 20%. With an order book of 1,300 crore, easing raw material costs, and strategic backward integration through its 2.2 GW solar cell and module plant, Shakti is well-positioned for sustained growth. We maintain BUY recommendation with a revised TP of INR 931, based on a PE(x) multiple of 20x on FY27E EPS.
Financial Highlights
* Q2FY26 revenue grew 5% YoY to Rs. 666 crore, with H1FY26 reaching Rs. 1,289 crore (+7%), supported by sustained execution under KUSUM and rising retail sales.
* EBITDA stood at Rs. 136 crore (20.4% margin), maintaining healthy profitability despite raw-material inflation; PAT came in at Rs. 91 crore for Q2.
Operational Highlights & Business Segments
* The Order Book: The current order book stands strong at Rs. 1,300 crore as of November 7, 2025, providing strong visibility for H2.
* Solar Pump Installations: The core business continues to show robust volume growth. o Q2 FY26: 22,304 units installed, a growth of 21% YoY. o H1 FY26: 39,861 units installed, a growth of 19% YoY.
* Retail Business: This segment is gaining significant traction, with sales surging 67% YoY to Rs. 43 crore, driven by a network of over 100 exclusive outlets.
* Solar Rooftop Business: Management is highly optimistic about this new venture, company has established a network of 57 channel partners and trained over 400 installers across Rajasthan, UP, and Maharashtra.
* Export Business: Exports are showing momentum, recording Rs. 103 crore in Q2 and Rs. 200 crore in H1 FY26.
* Receivables at 1,639 crore as of 30 Sep 2025; management targets normalization to 120 days by year-end
Outlook & Valuation:
* FY26 Outlook: Guidance Maintained with Margin Stability Management reiterated 20%-25% revenue growth for FY26 with EBITDA margin guidance of 20-21%. Execution expected to accelerate in H2 with improved payment flow under KUSUM and RMS cycles.
* Backward Integration: 2.2 GW Solar Cell & Module Plant (Pithampur) Capex of 1,200 crore for an integrated DCR-compliant solar cell & module facility (2.2 GW). Project commissioning is targeted by Mar 2027, enabling cost savings, import substitution, and eligibility for ALMM-linked projects.
* Capacity Expansion & Diversification Ongoing 500 crore capex plan includes doubling pump/motor/ VFD capacity and establishing a dedicated EV motor & controller facility. The company is also scaling rooftop solar and EMI-based retail installations through 57 channel partners
Shakti Pumps remains a structurally strong play on India's rural electrification and renewable energy. With its backward integration initiatives, planned entry into the solar rooftop segment, and a healthy pipeline of upcoming orders, the company offers strong earnings growth visibility for coming years. We maintain BUY recommendation with a revised TP of INR 931, based on a PE(x) multiple of 20x on FY27E EPS.
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