Shakti Pumps - solar shakti (power)!

The Company will have to rethink on its existing export orders as well as Kusum tender as Commodity prices have gone out of roof…
The Company seems to be very weak on technical charts also and is likely to test its support level at Rs 400.

Disclosure : Exited all my positions after Q2 results Concal

This news was not reported to the exchanges and upon seeking clarification the company has apologized!

Apparently this is their first successful patent and there are 28 more in the pipeline.

The problem of course is tender price vs commodity cost squeeze, and the fact that KUSUM scheme does not seem to have targets but is end-user/farmer demand driven. Though diesel pump-sets will be really expensive to run in comparison.

DC motors are the most efficient variety, using magnets instead of dual-windings (stator+rotor), hence their auto traction motors may start to sell if they work as good as their pumps.

Disc: invested

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Today AAP govt declared free 300 units of power to all in Punjab from 1st July. If this experiment (they have done it in Delhi but Punjab will be their first real test) succeeds, it will potentially impact sale of solar pumps negatively.

Any idea on how this patent is going to help the Company or its products.

As per management commentary margins will be range bound as KUSUM 2.0 is fixed contract project. As KUSUM 3 will launched in next calendar year we can expect similar margins in next 3 quarters also.

Sales have improved however inventory and receivables have also increased significantly.

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Results are below expectation… Margins have come down to 8.39% and guidance is 10% for the full year which is below earlier guidance of 15%.
Kusum scheme is yet to pick up across the state…

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Shakti Pumps Q1 Results!

Shakti Pumps currently for revenue is completely dependent on Kusum Scheme. Which should get over by 2024-25. Exports and retail is still not a very huge part of revenues. Sustainability of revenues is still a question.

Disclaimer: Invested. But reduced exposure.

Let me know what you think in the comments!!!

The Risks are known and reflected in the valuation. However If one does take the risks (Govt Business tends to be Lumpy and high working capital oriented, but Large volume and predictable!) then the story has just begun to unfold as the KUSUM scheme has large Ambitions and interestingly very willing stakeholders too!

The Co. has demonstrated 45% share in the Pilot project through farmer demand which is commendable.

Disc: Invested with medium term outlook

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Better to keep exposure limited. Not a very huge part of portfolio.

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Horrible show from the company but good Management Commentary!

Just noticed their other Investor Presentations and observed that the company has never given Management Commentary in their Presentations. Giving it this time is a testimony of the fact that the company realizes the panic these dismissal set of numbers can create and as such the company has tried to make its shareholders’ informed about the reason for the same. These is good practice and protects the investors from misrepresentations.

As per the commentary, the execution of 12000 pumps would have added a magnitude of Rs. 300 Cr to the revenue. So, once the order is executed we can see a good quarter hereafter.

Anyone has idea about recent promoter buying

Yes. The Promoter VTPL is buying regularly which has subsequently raised their holding to 3.85.

Q3 is also going to be a wash out… The promoters did not have any answers for their performance in Q3 as they are not undertaking KUSUM project and secondly there is no clarity on Uganda order due to price escalation clause. Q3 is expected to be worse then Q2. So next trigger will be in Q4 only whose results will come in April. Till that time the stock will consolidate at this level or even fall further.

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Key Notes from Nov 22 Transcript - https://www.bseindia.com/xml-data/corpfiling/AttachHis/cde1ee15-08ca-419a-8e6f-6021ab96e70c.pdf

For the quarter ended September 30, 2022,
Income from operation is INR 234.15 crores Vs INR 233.46 crores previous year’s same quarter.
EBITDA as a percentage is 13.77 % Vs 16.44% previous year’s same quarter.
PAT for the quarter is INR 22.74 crores Vs INR 32.15 crores previous year’s same quarter.

Volume for power tillers for the quarter is 8,819,
Tractor volume for the quarter is 1,688.

Small farm mechanization vertical, the turnover is INR 136.8 crores for the quarter
Tractor business, 63.31 crores.
Spares business, 23.42 crores.

Distribution -started Pilots in UP and Bihar in electric pumps (trading) – expecting 5-10 Cr this year

Roughly about INR 50 crores to INR 60 crores of CapEx planned this year, against which the spend has been about INR 15 crores in H1

Margins - We are back in the guidance range. And I think it can only get better, unless, of course, there is a disruption again.

Major savings on two heads. One, we were able to drive several fixed cost savings projects in this quarter two, which has got some savings. Secondly, on the logistics side, we have tried to renegotiate our contract and also bring in new vendors. So a lot of savings we have brought in even in logistics cost also

We did take a price hike on tillers at about INR 2,000 per unit

we should be comfortably doing something like 10,000 units next year, in the tractor space

With the onset of the festival in October, the deliveries and retails have been good. So, expect the second half of the year to be better than the first half.

Unveiling of VST- Zetor Tractors, on November 4th at Chandigarh CII Agri Expo and the launch will happen later in quarter 4. Expecting upwards of 1,500 to 2,000 VST-Zetor tractors next year. The African market numbers will come after the four-wheel drive is launched, major numbers. It will be the latter half of next year (In addition to the above numbers)

We are investors and suppliers to Monarch Tractors. Foxconn is going to manufacture for Monarch. Expected launch early '23 . we expect good numbers. We are giving them the gear train, the front axle and the rear axle. And we are in development for some other components as well. Too early to give numbers, would wait for some more time before we can talk more in detail on that.

Launching like four higher HP, 28, 32 and then 45, 49 and plus VST Zetor range. Zetor range will be 45-59 but at a very different positioning, the features and benefits will be very different. It will be the premium range of tractors compared to any other premium multinational product.

Exports has seen a slight decline in the month of August and September. This is primarily due to the issues in Europe. Looking at winter, Inflation etc, don’t think it will be as buoyant as last year in terms of the tractor sales, especially in Europe.

About INR 3,000 crores target by FY '25. : The first task is we will be crossing the INR 1,000 crores milestone this year. The next two years, we have done a work-out, it is looking like INR 2,000 crores plus by FY '25, but all-out efforts are being taken to ensure that the INR 3,000 crores happen at least by FY '26. I want to add one more, if I may. See, once this vision has been set, we have not had a single normal year. We had COVID, then we had commodity inflation, all sorts of issues coming up. So we took a complete review of this INR 3,000 crores milestone. It looks like we will be delayed by one year, and we will be able to get it in FY '26.

  • looking at lot of innovative products coming out of the small farm mechanization segment.
  • wanting to enter the US market with our compact tractor range.
  • getting into a serious play in our electric range of tractors.
    Going forward in the next six months to one year, these projects are getting into a revenue realization mode, which will give us the quantum jump that we are looking at.

supply agreements in Farmech Taiwan and MTD USA for Brush cutters and small farm machines,

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Numbers are not great, but multiple partnerships, initiatives are being pursued. While the 3000Cr target seems slightly pushed, I feel if a couple of right things get firing, we can see good numbers . Am positive about the initiatives to track progress for next 3-4 quarters

  • Invested.

Shakti Pumps Insider Acquisition: From Feb 2022 to 29 Nov, 2022, total acquisition by Directors/Promoters or Promoter Group is of about 214041 shares (approx 9 crores) which is about 1.21% of full market cap and 2.7% of floating market cap.