Buy Shakti Pumps Ltd For Target Rs.640 by Choice Institutional Equities Ltd
Key Conference Call Highlights
Margins:
* Management attributed the YoY EBITDA decline to two drivers: lower sales price realisation (~4%) and raw material inflation (~6%)
* Pressure characterised as temporary and external rather than structural; recovery guided as gradual on a quarter-on-quarter basis.
* Full backward integration across both plants indicated to add ~300 bps at the EBITDA level.
* Realisation per solar pump flat sequentially at ~INR 248,000
* No hedging position on steel, copper or aluminium, as the increase in price is viewed as transient
Order book: two-quarter visibility, partly contingent on unbooked inflow
* The INR 10 Bn order book is executable over the next two quarters.
* Further state orders expected by end of Q2FY27E; Maharashtra tenders under process, MP and Rajasthan progressing.
* On pricing: Component B operates as a rate contract with the farmer as decision maker, where brand and quality drive selection
Capex and funding: programme fully identified
* Total CapEx of INR 15–17 Bn to complete by September 2027, ~50% already deployed.
* 0.5 GW DCR module facility on track for September 2026; 2.2 GW integrated DCR cell and module project for September 2027.
* Working capital lines of ~INR 18 Bn across ~10 banks including one Qatari lender; separate term loan of ~INR 8 Bn sanctioned for the 2.2 GW project.
* Ongoing expansion across pumps, motors, VFDs and solar structures; vendor policy of 2–3 suppliers per product.
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’.
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