Reviews
Review In this edition, we have reviewed KSB Pumps and Force Motors. We suggest our reader-investors to HOLD KSB Pumps and Force Motors.
KSB PUMPS
We had recommended KSB Pumps in Volume 33, Issue No. 6, dated Feb 19 — Mar 4, 2018, under the ‘Special Report' segment. The stock was trading at Rs.812 then and was recommended because it demonstrated healthy financials, offered promising returns on account of favourable monsoons and the thrust provided by Budget 2018.
KSB is not only a major manufacturer of pumps and industrial valves, but also provides a wide range of services in engineering and IT. The company has sales and marketing organisations, manufacturing facilities and service operations across several continents. The major operational segments include pumps, valves and others such as manufacturing of castings. KSB provides products and services catering to building services, process engineering applications, waste water, mining and energy applications. The company provides solutions for areas of automation and drive technology.
KSB's financials indicate a 13.67 per cent growth in net sales to Rs.253.60 crore in Q2CY18 versus Rs.223.10 crore for the same quarter of the previous fiscal. The EBITDA of Rs.37.40 crore has increased by 22.30 per cent in Q2CY18 from Rs.30.58 crore in the same quarter of the previous year. The net profit shows an impressive rise of 39.41 per cent to Rs.21.40 crore in Q2CY18 from Rs.15.35 crore in Q2CY17.
The half-yearly results exhibit a growth of 12.13 per cent in the total income from operations and stand at Rs.466.10 crore in Q2CY18 as against Rs.415.66 crore in Q2CY17. The half-yearly EBITDA has increased by 9.77 per cent to Rs.48.40 crore in Q2CY18 from Rs.44.09 crore in Q2CY17.
Since our recommendation, the stock price has fallen around 4.06 per cent, but it is expected to move upwards due to the promising financial performance of the company. Hence, we recommend a HOLD.
FORCE MOTORS
We had recommended Force Motors Limited in Volume 33, Issue No. 2, dated Dec 25 — Jan 7, 2018, in the Cover Story when it was trading at Rs.3468. The recommendation was owing to the company's consistent growth in profits over the last five years, its promising return ratios and its debt-free capital structure.
Force Motors Limited operates in the automotive sector and is engaged in the manufacturing of both commercial and utility engines and vehicles such as traveller buses, school buses and ambulances. The company offers transport solutions for goods as well as passengers, covering rugged terrain in both rural and urban areas. Recently, Force Motors has agreed to acquire a manufacturing plant of MAN Trucks, a German commercial vehicle maker. On a standalone basis, the quarterly financials depict an increase of 19.61 per cent in the total income from operations, which increased to Rs.890.48 crore in Q1FY18 from Rs.744.45 crore in Q1FY17. Its EBITDA increased by a staggering 115.60 per cent to Rs.80.40 crore in Q1FY18 from Rs.37.29 crore in Q1FY17. The company reported an increase of 36.61 per cent in net profit to Rs.40.93 crore in Q1FY18 from Rs.29.96 crore in Q1FY17.
On the annual front on a standalone basis, the company reported an increase of 11.76 per cent in the total income from operations to Rs.3430.54 crore in FY18 from Rs.3069.37 crore in FY17. The EBITDA increased by 2.72 per cent to Rs.275.03 crore in FY18 from Rs.267.73 crore in FY17. The company reported a drop in net profit in 2018 by 18.32 per cent. The net profit in FY18 stood at Rs.146.95 crore as against Rs.179.92 crore in FY17.
Since our recommendation, the stock price has dropped by 49.48 per cent. However, with rapid growth in the automotive industry, we expect financial performance of Force Motors to revive in the coming quarters. Thus, we urge our reader-investors to HOLD on to the stock.
(Closing price as on Sept 07, 2018).