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There are 11 more Hidden Gems out of 30 published by our equity analysts in last 3.5 years which have given more than than 100% returns to our members within 12 to 18 months time period. We suggested partial profit booking in many of these stocks and our members en-cashed more than 100% returns and now hold remaining quantity for free in their portfolio.
We also like to share that there are Hidden Gems which gave negative returns to our members but downside was limited. We suggested our members to exit from some of these non performing companies to ensure that they utilize their capital in the most optimum way.
Below is the summary of Roto Pumps Ltd shared by our team under Hidden Gem research report - Aug'12.
The Authority has allotted us 20,000 sq. metres of land in Sector Ecotech-XII. Company planned to start civil works on the expansion project by 2009-end and commercial production was expected to start by end of 2011.
Company has imported machinery to the tune of Rs 5 crore for capacity expansion. The project was funded through internal accruals and bank loans.
Roto Pumps products are widely used abroad in sectors like oil and gas, pharmaceuticals, food industry and especially in waste water treatment plants. The company is also planning to diversify its business.
6. On equity of Rs. 30.91 million the estimated
annualized EPS for FY 12-13 works out to Rs. 31 and the Book Value per share is
Rs. 99.61. At current market price of Rs. 105, stock price to book value is
1.05 and with dividend yield of 2.4%, valuations are attractive with
limited downside risk.
Our equity analysts published Hidden Gem - Aug 2012 research report and shared it with all Hidden Gems members. Research report was published 22 months back on 05th Aug 2012. Hidden Gem stock of Aug'12 was Roto Pumps Ltd (BSE Code: 517500) and our team recommended buy at average price of Rs. 95 for target of Rs. 220 in period of 18-24 months.
We are glad to inform you that Roto Pumps target price of Rs. 220 was already achieved couple of weeks back. Today, Roto Pump Ltd has made its all time high of Rs. 286.10 (201% returns) and is frozen at upper circuit of 5%, Roto Pumps is now a 3-Bagger stock for our members within period of 22 months.
We are glad to inform you that Roto Pumps target price of Rs. 220 was already achieved couple of weeks back. Today, Roto Pump Ltd has made its all time high of Rs. 286.10 (201% returns) and is frozen at upper circuit of 5%, Roto Pumps is now a 3-Bagger stock for our members within period of 22 months.
We are not suggesting any partial profit booking yet as we believe company is getting re-rated considering attractive valuations and strong growth outlook for pump Industry in India and abroad. Recently,
company has announced setting-up of a joint venture company in Singapore. The
joint venture company would further make strategic investments in the related
field including business development of Company’s products in African
continent. We suggest our members to hold this stock in their portfolio. For
such small companies, its very important to know whether management is prudent and taking
care of minority share holders or not, Roto Pumps meet our expectation. Company is paying regular dividends since last 9 years and dividend payment has
increased from Rs. 1 to Rs. 3 and dividend yield was 4% at the time of our recommendation. Operating profit margin of the
company improved from 16% to 18% with sales growth of 17%, profit growth of 21%
and ROE of 24% during last 5 years.
There are 11 more Hidden Gems out of 30 published by our equity analysts in last 3.5 years which have given more than than 100% returns to our members within 12 to 18 months time period. We suggested partial profit booking in many of these stocks and our members en-cashed more than 100% returns and now hold remaining quantity for free in their portfolio.
We also like to share that there are Hidden Gems which gave negative returns to our members but downside was limited. We suggested our members to exit from some of these non performing companies to ensure that they utilize their capital in the most optimum way.
Below is the summary of Roto Pumps Ltd shared by our team under Hidden Gem research report - Aug'12.
Company Background
Roto Pumps is an engineering company
with global focus. With presence in over 40 countries, company aims to provide
localized solutions in application engineering, deliveries and sales support.
As a positive displacement pump
manufacturer, company continuously endeavors to increase our pump basket to
cater to wide spectrum of industries and applications. Roto Pumps basket
consists of Progressive Cavity Pumps, Twin Screw Pumps, Dosing Pumps, Food
Pumps and General Purpose Pumps.
Company greatest asset is the
application expertise gained in the last 40 years in providing fluid
engineering solutions to thousands of customers worldwide.
Company’s manufacturing
infrastructure spans over 20000 sq. meters and is equipped with machine tools
like CNC and other SPMs. The units are certified with ISO 9001-2000 quality
surveillance systems and it has the coveted ATEX certification. One of the
focus area of company’s manufacturing is the Research and Development. This
facility is equipped with state-of-the-art testing equipment, captive machine
shop and design centre.
Infrastructure
Roto
Pumps has strong roots in manufacturing engineering and has over the years been
able to develop efficient manufacturing processes both in the field of metal
cutting and rubber processing. Spread over a combined factory area of 20,000
sq. meters, these units are equipped with sophisticated machine tools like CNC
and other SPMs. These are also geared up with modern testing facilities
including water and oil test bed with sophisticated data.
The
continuous investments in precision instruments in in-house manufacturing
facilities for critical components ensure 100% control over quality and
customer satisfaction. Roto Pumps manufacturing units are certified for
conformance with the ISO 9001-2008 quality surveillance systems. We are also in
the process of acquiring ISO 14001 and OHSAS 18001 (Occupation, Health, Safety
& Environment) certifications.
Research and Development
Roto Pumps Research and Development facility is
the concrete realization of its philosophy of providing cost effective fluid
engineering solutions. It translates concepts into prototypes and prototypes
into final product. Our Research & Development team was also instrumental
in helping the company to get its product accredited to ATEX certification.
This
facility is equipped with state-of-the-art testing equipment, a captive machine
shop and design centre. The design centre is equipped with 3D designing
software (solid works) and also deploys advanced software for flow analysis,
mechanical strength and cost optimization. Staffed with highly qualified and
experienced professionals, the Roto Pumps R&D centre is playing a critical
role in helping the company maintaining its leadership by continuously
upgrading the technology as well as expanding the product range.
Sales Network
Roto Pumps Ltd marketing head office is in Noida, India. Company has its branch offices and warehouses in United Kingdom and Australia to cater to the large Europeon markets. It has also established prominent distributors all over Europe, Middle East, South East, Far East and North & South America. Recently, company started a subsidiary in Germany.
Recent
Developments (05th Aug 2012)
1. Increasing product reach by
offering Innovating Solutions to Customers
Roto Pump is actively participating
in events related to pump industry to add new customers. Company has recently
invited its existing and new clients from different geographies to attend
events like STAI India scheduled from 24th – 26th Sept
2012 at Hyderabad, India and Weftech 2012 scheduled from 1st –
3rd Oct 2012 at Louisiana, USA.
2. Roto Pumps Capacity Expansion
Roto Pumps Ltd, manufacturer of
progressive cavity pumps and twin screw pumps, started capacity expansion plan
two years back. The expansion was taken place on the plot allotted to the
company by Greater Noida Industrial Development Authority.
The Authority has allotted us 20,000 sq. metres of land in Sector Ecotech-XII. Company planned to start civil works on the expansion project by 2009-end and commercial production was expected to start by end of 2011.
Company has imported machinery to the tune of Rs 5 crore for capacity expansion. The project was funded through internal accruals and bank loans.
Roto Pumps products are widely used abroad in sectors like oil and gas, pharmaceuticals, food industry and especially in waste water treatment plants. The company is also planning to diversify its business.
Financial
Performance (05th Aug 2012)
Roto
Pumps net profit rises 93.94% in the March 2012 quarter
Roto Pumps net profit rose 93.94% to
Rs 25.6 million in the quarter ended March 2012 as against Rs 13.2 million
during the previous quarter ended March 2011. Sales rose 44.36% to Rs 24.57
million in the quarter ended March 2012 as against Rs 17.02 million during the
previous quarter ended March 2011.
For the Audited full year, net
profit rose 34.88% to Rs 72.7 million in the year ended March 2012 as against
Rs 53.9 million during the previous year ended March 2011. Sales rose 28.43% to
Rs 759.9 million in the year ended March 2012 as against Rs 591.7 million
during the previous year ended March 2011.
Roto
Pumps net profit rises 87.41% in the December 2011 quarter
Net profit of Roto Pumps rose 87.41%
to Rs. 25.3 million in the quarter ended December 2011 as against Rs. 13.5
million during the previous quarter ended December 2010. Sales rose 36.76% to Rs. 212.74
million in the quarter ended December 2011 as against Rs. 155.56
million during the previous quarter ended December 2010.
Key
Concerns & Risks (05th Aug 2012)
1. The Indian market is becoming
intensely competitive with cheap imports from China predominantly in the simple
water handling pump market & presence of multi-national companies in the
high end of industrial segment.
2. The Indian companies would have
to continuously invest in R&D, Manufacturing and Product Technology in
order to improve product efficiency and cost effectiveness to retain and grow
their market share.
3. There is going to be pressure on
margins due to steep increase in input costs & Interest rates. The
Government approach to rein in the Inflation is having a dampening effect on
the growth of the economy and sluggishness towards reforms is hampering the
inflow of Foreign Investments.
4. Cheap Imports backed by favorable
commercial terms from China pose a definite risk to the Domestic industry.
Saral
Gyan Recommendation (05th Aug 2012)
1. Steady growth in Indian economy
especially increased investments in infrastructure & development projects
will continue to provide enough opportunities. International market also offers
good opportunities in niche market despite sluggish economic scenario.
2. Roto Pumps valuations are
attractive compared to other listed players like KSB pumps, WPIL, Kirloskar and
Shakti pumps. Roto pumps is trading at PE of 4.5 whereas other companies like
KSB pumps and WPIL are trading at PE multiple of above 14 and 16 respectively.
3. In terms of revenue, Roto pump is
a smaller player compared to its peers. With recent capacity expansion
programme; there is enormous potential for the company to scale up its
business. Another positive about the company is its operating margins, Roto
pumps operating margins are better compared to other listed companies in the
same segment.
4. As per our estimates, PEL can
deliver bottom line of 96 million for full financial year 2012 – 13, annualized
EPS of Rs. 31 with forward P/E ratio of 3.4 X for FY 2012-13, which makes stock
an attractive and safe bet at current market price.
5. Company has paid regular interim
dividends to share holders since last 7 years, dividend payout is increased
from 100% in 2005 to 250% in 2011.
Considering attractive valuations and the growth potential
of the company, Saral Gyan Team recommends “BUY”
for Roto Pumps Ltd. for a target of Rs. 220
over a period of 18-24 months.
Buying Strategy:
- 50%
at current market price of 105
- 50%
at price range of 83-85 (If stock price falls during market correction)
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Regards,
Team - Saral Gyan.
