Hope you are doing well.
Shakti Pumps is one of the largest players supplying Solar Pumps under the KUSUM scheme and expects strong growth going ahead.
Like all the other stocks, this one too is going through a phase of correction and is down 50% from the peak. We decided to dig deeper into the company.
Below, we have shared notes from the Q3 FY 23 con-call transcript of the company:
Before that, some good news for medium-long term investors
Individual investor participation in shares dropped to 34 months low in Jan'23. Google trends - Multibagger chart also indicating low investor interest
To know why this is good news for investors with 3-4 years investment horizon Click HERE
Shakti Pumps - Notes from Q3 FY 23 con-call transcript
- General Points
- I am very happy with our performance in Quarter 3 and our team’s hard work despite these harsh conditions which has enabled us to post a revenue increase of 17% Y-o-Y with 29% YoY increase in the Solar EPC business
- The business we did in KUSUM in this quarter is total of Rs 223 crores
- Export business
- Export revenue stood at Rs 166 crores in 9MFY23 up by 24.5% from Rs 133 crores the previous year
- USA contribution is 33% of export revenue
- In the US, we are also selling water pumps and in a few places we have started selling our solar pumps also, but our major sale is domestic water-supply pumps
- KUSUM - Solar Pumps
- Solar Energy Corporation of India (SECI) has issued new tenders for approximately 6.6 lakhs pumps in the month of December 2022. The tenders are expected to complete by March 2023 and we are expecting to receive some orders from Q1 FY 24
- Government has also tightened up the rules and laws and improved the eligibility conditions of the tenders due to which large/organized players are in a better situation as against the earlier orders
- This time its rate is also very good and competition is also less, so we are confident we will get good business
- Our strong states like Madhya Pradesh, Rajasthan, Haryana and Punjab where we have already established ourselves has been coming up with strong demand
- Out of this 666,000 pumps, requirement of approximately 500,000 pumps are from these states only
- We feel that in the coming time, we will be able to take 30% to 35% market share
- Understanding tender conditions
- This is a market mode tender. In this farmers will be the decision maker, whichever company’s pumps he wants, he will purchase the pump of that company
- In previous tenders MSMEs had the right to give their rate, but in this tender they do not have the right first of all. Further, along with their financial bid they have been asked 3% bank guarantee which they have to give on the spot and if they run away after giving tender then their 3% guarantee will be seized
- Tender in different states will be different. If at one place, if anybody gives a wrong rate then at remaining states he will not be able to give the tender
- We and Tata are the only players in India who can give tenders in all states as there's a experience requirement of selling at least 40,000 pumps
- Old orders
- The rate has already expired, so we requested to the ministry that at this rate we are not in a situation to supply pumps which the ministry accepted and new tender came and at the increased rate itself the orders worth of Rs 500 crores of Haryana which we have kept on hold, we hope that we will get it at the increased rate and we are working on that
- We have few orders, in Maharashtra we are working in one different tender. We are working on one different tender in Chhattisgarh which does not come under KUSUM, in that we will continue our sale in that and we will execute that
- Why low margins
- Solar panel prices have increased
- 10 crore term loan and 46 crore short term loan
- Capacity utilization
- Around 30%
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Disclaimer: This is not a recommendation to buy/sell Shakti Pumps. These notes are as announced by the companies on exchanges and only for the purpose of information and education.
SEBI Research Analyst Registration No. INH100001690
Research Analyst Details
Name: Ekansh Mittal Email Id: [email protected] Ph: +91 727 5050062
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