This high growth sector could produce the next set of multibagger stocks in 2024

This momentum has propelled the industry to a valuation of $930 million, with projections to reach $1.19 billion by 2029, thanks in part to India's ambitious moves towards solar energy integration.

The PM KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan Yojana) scheme aims to significantly boost solar capacity by 2026, adding 38,000 megawatt (MW), through the installation of solar-powered agricultural pumps and small solar power plants. For this it plans to install small solar power plants, 2 million standalone solar powered agriculture pumps, and 1.5 million grid connected agriculture pumps.

This initiative is already benefiting Indian pump manufacturers, poised for further growth.

In this article, we’ll look at the top companies that already have a leg up and could possibly benefit as the sector grows overall.

#1 Shakti Pumps

Shakti Pumps leads the pack with a strong foothold in manufacturing a comprehensive range of pumps, motors, and controllers.

Dominating the solar pump market with a 30% share, it thrives as a primary beneficiary of the PM KUSUM scheme. The company boasts a robust product line-up and impressive manufacturing capabilities, producing over 500,000 pumps annually.

Shakti Pumps is also the only company with in-house manufacturing of an entire range of products, such as variable frequency drives, motors, and inventors for solar pump installation.

In the last five years, its revenue has grown at a compound annual growth rate (CAGR) of 12.2%, driven by volume growth led by a strong distribution network and a dominant presence in the solar pump market.

Its net profit saw a degrowth of 11.8% CAGR, primarily due to high raw material prices and intense competition.

However, the company's profit and margins have grown in the last three quarters. High order inflow, faster execution, and its focus on cost-cutting have led to a sharp rerating for Shakti Pumps.

Its order book as of December 2023 stood at ₹22.5 billion.

Despite challenges, Shakti Pumps has shown remarkable revenue growth and is aggressively expanding its capacity to venture into new markets, including the electric vehicle sector.

The company is expanding its capacity to 700,000 units per annum to venture into the electric vehicles (EV) segment.

It is also investing heavily in research and technology (R&D) and secured four new patents in the financial year 2024, taking the total patent count to 11.

#2 KSB

Second on the list is KSB, offering a wide array of pumps for various industries. With a significant presence in India, marked by extensive manufacturing and service networks, KSB enjoys a healthy market share.

The company has seven manufacturing facilities, 200 authorised service centres, and 1,000 authorised dealers in India, and a market share of around 7.5% in the domestic pumps and valves industry.

In the last five years, the company's revenue has grown at a CAGR of 10.8%, driven by its leadership position in the energy, oil and gas, and nuclear (pumps) sectors in the domestic market.

Net profit grew at a CAGR of 20.6% on the back of cost optimisation measures, increased share of after-sale services, and high order inflow from customers.

As of September 2023, its order book stood at ₹22 billion.

Its stellar financial results positively impacted its performance on the share market. In the last one year, its shares zoomed by 100%.

The company has moderate capex plans with a focus on expanding its product portfolio across petrochemical, water handling, and building services segments.

It s also focussing on developing new hydraulics and sizes to cater to the market needs.

#3 WPIL

Third on the list is WPIL.

The company is engaged in the entire value chain of pumps and pumping systems. It is involved in the commissioning and executing of water supply projects on a turnkey basis.

It also manufactures conventional and large water pumps and motors, which are used for irrigation, industrial, and municipal purposes.

The company has 12 manufacturing units across the world, with 5 in India and the rest in other countries such as South Africa, Australia, Zambia, Singapore, UAE, and Switzerland.

In the last five years, its revenue has grown at a CAGR of 9.1%, driven by higher volumes. The net profit also grew by a CAGR of 7% on the back of higher execution of turnkey projects.

It has a low debt-to-equity ratio of 0.1x and an interest coverage ratio of 13.6 times, indicating low financial obligations and high liquidity.

Its strong financial performance is also reflected in its performance on the bourses.

WPIL has a strong domestic order book of ₹37.3 billion and an international order book of ₹8.2 billion as of September 2023.

Being one of the leading players in the industry, WPIL continues to expand its operations in newer markets.

Moreover, it plans to diversify its portfolio to capture the growing demand for pumps in the domestic market.

The company is also investing heavily in research and development (R&D) to develop new products and new techniques to execute its turnkey projects.

To add to this, the government’s Jal Jeevan Mission and Atal URBAN Renewal Mission 2 schemes will create a healthy demand for pumps in India over the next five years.

#4 Roto Pumps

Next on the list is Roto Pumps.

The company is a pioneer manufacturer of progressive cavity pumps in India. It also manufactures twin screw pumps, gear pumps, macerators, AODD pumps, and retrofit spare parts.

Its products offer reliable pumping solutions to diverse industries, including sugar, paper, paint, oil and gas, chemicals, renewable energy, mining, and defence.

The company has state-of-the-art manufacturing and research facilities allow it to innovate and develop new products to cater to new sectors.

In the last five years, its revenue has grown at a CAGR of 11%, driven by higher domestic and overseas sales.

Its net profit also grew by a CAGR of 15.4% despite a hike in steel prices.

Good performance has trickled down to returns as can be seen from the chart below.

Roto Pumps is focussing on reducing costs and improving profitability. It is implementing SAP software to cut costs and manage inventory efficiently.

The company is also investing in R&D to develop new products and cut the life cycle costs of products.

Given the company's long-established presence in the industry, its efforts will drive revenue and profit growth in the medium term.

#5 Latteys Industries

Last on the list is Latteys Industries.

The company is engaged in the business of manufacturing submersible pumps and motors.

It has a portfolio of over 1,200 pumps that are useful for domestic, agricultural, horticultural, and industrial purposes.

With a manufacturing capacity of 120 thousand pumps per annum, the company caters to Indian and international markets.

In the last five years, its revenue has grown at a CAGR of 14.4%, driven by higher volumes. The net profit also grew by a CAGR of 10.2% during the same period.

It has a debt-to-equity ratio of 0.1x with an interest coverage ratio of 2.4x.

The company's shares migrated from the NSE Emerge platform to the main board of NSE in May 2023. Ever since its listing, the shares have fallen by 45%, primarily due to a fall in profits driven by high raw material prices.

Given the rapid growth in the construction and manufacturing sectors, the demand for pumps is expected to go up.

Since the company is primarily into manufacturing pumps, there is a significant growth opportunity.

To further diversify its revenue, the company also ventured into manufacturing EV charging stations, electric garbage vans and LED lights.

All this can help the company grow its revenue and profits in the medium term.

List of Other Pump Manufacturers in India

Apart from the above, here are other companies which primarily focus on pump manufacturing:

Although the sector is witnessing high growth, it is important to treat these stocks with the same amount of caution as other stocks.

Track pump stocks closely and keep a watch on their developments.

Happy Investing!

Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com