Copying from earlier posts:
31-12-2023, Total pump installed - 2.84 lacs
31-3-2024, Total pump installed - 3.14 lacs
30-6-2024, Total pump installed - 3.97 lacs
31-07-2024, Total pump installed - 4.46 lacs
31-08-2024, Total pump installed - 4.64 lacs
31-09-2024 - Total pump installed - 4.99 lacs
Execution pace has increased. But given the competition, i suspect Shakti market share might have fallen. But even if its 20% market share, Q2 will be easy 600 Cr…
Order book will be critical…
I don’t believe quality companies are at a very high valuations. Many high quality private banks, FMCG and large cap IT stocks are either trading around, at or below their historical valuations. If there is overvaluation in any pocket, it’s in small or midcaps.
Plus looking at company’s valuation purely from P/E perspective is wrong as you will be missing out on a lot of quality businesses. There is a whole lot of other factors that influence valuations. Lots of people wrote off Trent, Divis Lab, Zomato in 2022 citing very high valuations and they have turned out to be multibaggers.
If you are new to investing then my recommendation is don’t take too many risks with your capital. One thing I have learnt from Mr Buffett, in hard way, is "Rule #1: Never lose money. Rule #2: Never forget rule #1.”.
Your chances of protecting your capital are higher in a decently diversified portfolio of quality stocks. Even if you get valuation wrong, you will still make money in long run on portfolio basis.
But you chase high return or alpha too early in average or inferior businesses with no long term visibility, risk of losing your capital is very high and painful.
Also keep in mind that in Bull Markets, l businesses look good. Management commentary is good, order book is strong, narrative is promising. Only when the tide turns we come to know who are swimming without clothes. And thing with stock market is that tide always turns. There is always a bear market after bull market. We just don’t know when.
Company hasn’t won any big orders recently and the MH order will keep exhausting. Probably the reason why the guidance of 30% increase in topline with results frontloaded in q1 and q2.
Morever, there were a few tenders of KUSUM C which they did not win. So management commentary would be vital. The PE looks optically lower if 30% topline growth target for the FY YoY is maintained.
Hi, thank you for posting updates, opinions and healthy discussion. I am keenly following Shaktipump since year.
I think tender for pm kusum component c (ips) is still not floated wherein Shaktipump is eligible. Some Tenders floated under component c are for feder level solorization and that is not for solar pump, hence shakti pump did not participated same.
Let me know if I am missing anything.
Dis.- invested at lower level.
its 3 - 4.5 lakhs depending upon which type of pumps are used.
so with a Capacity of about 5 lakhs, and assuming an average price of about 4 lakhs , thats about 200cr is that right?
Thank you for your guidance. I have further questions on this and would ask if I can ask those separately in another forum?
Sticking to Shakti Pump.
What I was reading on X and I quote:
“I can’t and no one can time the markets. I have a very simple calculation:
Total addressable market is 49 lac pumps out of which only 3.5 lacs has been installed so far. This means 90% of market or 1,47,000 cr is still open to cater.
shakti pumps has monopoly and it is going for capacity expansion so its a multi year story.
In FY25, i expect it to do 3000 cr revenues with 20% PAT or 600 cr of PAT. This will make it valued at 1 year forward PE of just 8.
We have KSB which is similar pump co at 75 PE.
This is a direct proxy to solar and water theme. 50% of cost is modules.
In 2 years, co will do 5000 cr of revenues comfortably.
So, I am very bullish and only because there is data to support it. I am not armchair analyst like Gobernn.”
Are all these highly optimistic views and one need to moderated as there will be immense competition.
My one cent… you cannot forecast numbers with certainty when it is B2G business…
Yes, pls send me a direct message as we won’t like to crowd this thread with my rant 
My investment philosophy prioritizes quality, resilience and longevity of a business with strong management at helm. So if a certain business or company doesn’t pass that filter, I don’t look any further. So in that respect I can’t comment on numbers you have posted as I don’t track or research this sector.
@Rajneesh_Vashisht based on the quote, I wonder why Shakti pumps is called monopoly business when there are many other competitors around.
Further, to relate it to my query:
Why others are not getting big orders here?
this was discussed in the concall and promoter reply was:
Again most interesting disclosure was:
Again in EV Mobility space, already 2000 buses running on the road fitted with their Motor…
For more details you can access past concalls here:
Disclosure: invested from 800 level,didn’t trade since…watching closely.
Thats 2000 crores revenue we must be speaking about acc to capacity which itself hasnt been utilised as off now as Demand hasnt grown to the existing capacity. But then timeline around which this maybe monetised isn’t known as off now.
By your calculation we cannot even try and extrapolate where the Profitability would be in next 3 years down the line.
Instead take into account current order book and then execution timeline,OPM and EBIDTA Margins,EPS all annualised and then projecting the Market cap of Shakti pumps \going ahead at the end of the year.
Hpe this helps
Well, yeah. I had quoted that from X and what I wonder was that with such a wide market why is Shakti pump at such low PE when other RE players are 100+.
It may be because of this business doesn’t have longevity which impacts the valuations or who knows we all have made a jackpot.
As others have quoted. - it’s nice to know that they have PhDs but then as oft quoted that between quality of a business and quality if management it’s former who beats the latter … if i may say hands down.
Others are welcome to put their views on why the pe of Shakti pump is at 36 which in today’s environment may be called a value.
The management had targetted a 1800 cr top line. Right now their TTM has already crossed that. If they do 500 cr this quarter the ttm p/e will go further down.
This would mean q3 and q4 together will be 700 cr which many folks do not agree or believe. But the reality is that these bumper quarters were driven by the Maharashtra order and the order book for that shall exhaust by this FY. Company hasn’t won any big orders post the MH order. So there is no visibility even for q1 next FY.
Company is trading optically at 36 p/e. Recently spiked margins also may not be sustainable.
Disc: it was my largest holding. Booked 2/3 this month.
Company won 600 cr order from UP 2 Months back, that will also complete in an year
Results of Shakti Pump is fabulous YoY , as the base was extremely low. If one considers the results QoQ there is increase i revenue as well as net profit. The half yearly EPS is Rs 96.8 where as the entire year EPS for the FY 2023-24 was Rs 77. Company likely to touch yearly EPS of Rs 215 in the current FY. Lets see what the management says during the concall on Monday
shakti Pump.pdf (3.1 MB)
From where this 215 number came?
The trade receivables have increased to 1,000 + crores now… Negative OCF and stress on working capital borrowings…
Have tried to delve into some of the pointers/questions which got discussed multiple times on this thread.
1. What is the actual business construct under PM Kusum scheme? Is it B2G or B2G2C
On the surface, PM Kusum Project may appear to be a B2G (business to Government) play. However, particularly for this scheme, the business nature is slightly nuanced (and maybe, has not been explored well). In a typical B2G, end-user dont have much say/choice on the brand, configuration and prices of end-product. However, in case of solar pumps under PM Kusum scheme, farmer is indeed deciding on the brand and specification that he want to install, right at the stage of application:
How do we know? Here is the policy roll out document from HREDA portal:
Same is validated by the process flow outlined by Tata Pumps:
So, in a situation where rest being equal (price, technical specification etc.) factors like long standing history, brand trust, after-service reliability, grass root level presence/engagement etc. will be key deciding factor for a farmer to make a purchase decision. Thinking with this context, established players (the likes of Shakti Pump, CRI, Roto Pump etc.) with market standing for few decades are serious contender in the decision-making process for farmers.
On the other hand, in general, many of the state level empanelled vendors appears to be one who are comparatively new entrant in the domain and may be piggybacking on the capabilities that they have got on solar modules side while procuring pumps from white label manufacturers. For context Oswal Pumps is the major supplier for Tata Pumps and claims to have supplied ~44% of the total installed pumps under Kusum scheme thus far. If the numbers are to be believed, it clearly establishes the lack of competency for the assembly /fabrication type of vendors.
Take a look at the recent approved vendor list, many of them has no noteworthy history as Pump Manufacturer:
Maharashtra:
Empanneled Vendors Maharastra.pdf (565.2 KB)
Haryana:
information brochure_2024-25.pdf (537.8 KB)
2. Contrasting performance amongst states:
IMHO, in context of PM Kusum scheme, second important nuance worth noticeable is the performance contrast between the top 3/5 states vs. rest.
There lies an underlying common theme with states which has reported highest installation of solar Pumps under Kusum scheme (i.e. Maharashtra, Haryana, Punjab etc.). Some of top states has embraced the scheme well and have made enabling policy and administrative measures.
In the initial draft MNRE had envisioned 40% cost share by farmer and rest 60% split between state exchequer and MNRE (central nodal agency). These top performing stats have reduced the farmer share of installation cost substantially by providing additional subsidies from state side. Farmer has to pay only 10% of total cost in Maharashtra, 20% in Punjab & HP, 25% in Haryana.
And all these enabling efforts are reflected very well in the leap and bound growth shown by states who have embraced the policy and have created an enabling mechanism. Please pay attention to the kind of growth that Maharastra and Haryana had in last 6 months.
Whole point being, centre may have grand plans however conducive policies and alignment by respective states is the driving force and may continue to be so.
3. Must be elongated working capital cycle being B2G:
Further, there are some concerns related to working capital heavy operation effect considering the B2G contracts. I think we ought to understand the end-to-end administrative mechanism and event workflow.
In nutshell, MNRE who works as a central government nominated monitoring agency has created a portal/digital platform for centralized monitoring which in turn takes feed from state portal/databases. Each of the vendor has to update the work status report on the portal. State level allocation, inspection, approval, payment and rest of the workflow steps goes through this portal. Ultimately, MNRE completes the central government part of funding to states based on closure of state level tasks. Each of the steps has well defined timelines and remedial actions.
[perhaps that’s the reason that MNRE is able to report the performance updates on an almost real-time basis on the portal ]
Theoretically, vendors are getting paid 90% of the billed value for the month and rest 10% after a waiting period of 30 days.
4. Growth Run-way:
Final part, Government has set a target of ~14 lac pumps under component B of PM Kusum scheme part 3. Below is the breakdown of sanctioned vs installed numbers to get a view of pending scope of work. At an aggregate level, ~62% work is still pending (translating to ~8 Lac Pumps). Shakti’s strong hold states like Maharashtra and Haryana (20% market share) and Rajasthan (37% market share) alone has close to 6 Lac pumps deployment work pending. As evident from the below table, the way execution pace has picked up in top states (Maharashtra, Haryana and Rajasthan) in last 6 months is good indication of things to unfold in next 1- 2 years.
On the negative side, have learned few things which are slight negative at the overall PM Kusum scheme – at least from farmers POV.
Thanks,
Tarun
Disc: Invested, transactions in last 60 days
Order book is static and dependent on Government, Promoters are not in a position to give guideline for more than one quarter neither for sales nor for order book.
Recievables have increased to more than Rs 1000 Cr . Capital raised for CAPEX seems to have been utilised for woking capital. Goverment will never allow any entity to make disproportionate profit and hence in all probability and hence there will be revision in pricing once the term tenure of current tender expires.
Management had been maintaining that the current capacity is sufficient for 500000 Pumps, current utilisation is far less …so not able to understand why we need additional CAPEX.
Disclosure: fully exited some time back.
