Broker's call: KSB (Buy)

Our Bureau | Updated on: Mar 04, 2022

Anand Rathi

Target: ₹1,352

CMP: ₹1.057.70

We believe KSB is well placed to benefit from strong opportunities in FGD, nuclear power, O&G and exports. Such prospects would also boost its after-market and services (15 per cent of its sales) due to increased installed base and expansion in dealer network and service centres. Q4CY21 results were a mixed bag with revenue ahead of estimates due to strong execution.

However, increased raw material cost impacted the profitability. CY21 order inflows were of ₹1,500 crore (₹1,300 crore in CY20) and the management targets ₹2,500 crore order intake in CY24. The favourable demand environment, execution abilities and attractive valuations keep us upbeat.

With capacity built up ahead of competition and pre-qualification in place, we expect good opportunities in FGD and nuclear. NPCIL announced 12 reactors (each of 700MW), a ₹500-crore opportunity each, by 2031.

FGD and the Atma Nirbhar vision are perceived as large opportunities. The company is eyeing increased services (25-30 per cent) and export business in coming years. Agriculture, Smart cities, waste-water management and O&G also throw up healthy prospects.

However, due to raw material volatility, we have tweaked our estimates, arriving at a target price of Rs1,352, 25x CY23 P/E. We retain a Buy.

With tweaks to our estimates, we expect 13 per cent/12 per cent revenue/PAT CAGRs over CY21-23. The stock trades at an attractive 23x/20x CY22/ CY23 P/E.

Published on March 04, 2022
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