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Hidden Gem - KSB Target Price 965
KSB looks well positioned to benefit significantly from strong capex outlook in infrastructure and industrial segments like refineries, petrochemicals, pharmaceuticals, chemicals, power, nuclear, steel, cement, irrigation, waste water and construction
Domestic demand during this year has been better, led by standard pumps segment which is 50-60% of total revenue. However, exports revenue was impacted due to geopolitical issues which impacted the overall revenue growth in 9MCY24.
9MCY24 revenue growth stood at ~10% YoY but management has maintained its guidance of 15%+ YoY revenue growth for CY24E. This implies ~25% YoY revenue growth in Q4CY24E
Company’s order backlog stands healthy at ~Rs 2400 crore, of which 50% is from nuclear segment where significant execution pick-up is yet to take place
Overall revenue growth visibility remains strong for CY25E & CY26E, considering the execution pick-up in nuclear & projects segment and recovery in exports
Margins are also expected to improve, led by increasing share of after-market segment and steady growth in standard pumps segment
We estimate revenue CAGR of ~16% over CY23-26E while PAT CAGR of ~21% over the same period
Valuation at 36x P/E on CY26E earnings look attractive considering the strong growth outlook. We have a target price of Rs 965 on the company
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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