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    KSB

    KSBGood
    Capital Goods·2 Aug 2024
    Management Summary

    KSB delivered a steady performance in H1 2024, characterized by a recovery in operating margins to 14% and strong order inflows in the standard pumps and valves segments. While the nuclear business faces short-term execution delays due to site readiness and testing requirements, the long-term pipeline remains optimistic at ₹1,300 crores. Management is aggressively pivoting towards high-growth areas like Solar and Wastewater, while maintaining a disciplined focus on the SupremeServ aftermarket business to sustain long-term profitability.

    Highlights

    8

    • H1 2024 Revenue from operations reached ₹11,902 million, showing approximately 10% growth.

    • Profit Before Tax (PBT) for H1 2024 recorded at ₹1,483 million.

    • Order book (excluding nuclear) remains robust at ₹11,948 million as of June 2024.

    • Nuclear order booking has reached nearly ₹1,300 crores, though revenue recognition for the first set is delayed to H1 2025.

    • Solar segment achieved ₹80 crores turnover YTD, with a full-year target of ₹150 crores.

    • Operating margins recovered to 14% in Q2, up from approximately 11% in the previous two quarters.

    • Valves division achieved its highest-ever sales in Q2 and highest order intake for H1.

    • Inventory levels were reduced to ₹5,636 million to better control working capital.

    Key financials

    Metrics

    6

    Periods

    2

    Headline

    4
    • EBITDA Margin
      14%
    • Order Book (Ex-Nuclear)
      11,948 Mn
    • Gross Margin
      43.5%
    • Net Financial Position
      3,152 Mn
      QoQ+14.7%

    H1

    2
    • Revenue
      11,902 Mn
      YoY+10%
    • Profit Before Tax
      1,483 Mn

    Segment breakdown

    Standard Pumps
    52% Order Share
    Valves
    ₹350 Cr Annual Turnover13% EBIT Margin
    Solar
    ₹80 Cr YTD Turnover
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Margin
    EBITDA Margin
    13-14%
    		High
    Revenue
    Solar Business Turnover
    ₹150 crores
    		High
    Revenue
    Nuclear Revenue Recognition
    ₹100 crores
    		Medium
    Revenue
    Solar Pump Business Aspiration
    ₹500 crores
    		Medium
    Market Share
    SupremeServ Revenue Share
    20-25%
    		Medium

    Risks & concerns

    4
    RiskSeverity

    Nuclear Project Execution Delays

    Delays at customer sites (Gorakhpur) and first-time 'Made in India' testing requirements are pushing revenue recognition. — Both acknowledged

    medium

    Solar Business Working Capital

    PV panel prices are volatile (valid for 7 days) and payment terms are tight (2 weeks), creating working capital challenges. — Management acknowledged

    medium

    Thermal Power EPC Constraints

    BHEL's dominance in the coal-fired EPC market limits KSB's opportunity to mainly FGD and auxiliary pumps as BHEL manufactures its own main pumps. — Management acknowledged

    low

    Areas of Evasion(1)

    • Specific value of locomotive pump orders from Siemens/ABB due to competitive sensitivity.

    Q&A highlights

    3

    “The site and the site Gorakhpur, Haryana, has got delayed... we are making this pump first time 100% in India... we should get the sales revenue in the first half of the next year.”

    Explains the revenue push-out for the high-margin nuclear segment from FY24 to FY25.

    asked by Kunal, B&K

    2 min read5 chapters

    Detailed Narrative

    01

    Nuclear Segment: Execution Hurdles vs. Long-term Pipeline

    The nuclear segment is a critical growth driver with an order book of approximately ₹1,300 crores. However, revenue recognition for the first set of pumps (initially targeted at ₹100 crores for 2024) has been pushed to H1 2025. This delay is attributed to site readiness issues at Gorakhpur, Haryana, and the rigorous testing required for the first-ever 100% 'Made in India' nuclear pumps. Despite these short-term delays, management remains optimistic about the 7-10 year pipeline for nuclear projects.

    02

    Solar Pivot: Rapid Scaling with Working Capital Challenges

    KSB has rapidly scaled its solar business, achieving ₹80 crores in turnover YTD with a target of ₹150 crores for the full year. The company aspires to reach ₹500 crores in this segment within 2-3 years. While growth is robust, the segment faces lower margins (due to 50% bought-out components) and significant working capital intensity. PV panel price volatility and stringent payment terms from suppliers require high operational efficiency to maintain profitability.

    03

    Margin Dynamics: The Balancing Act

    Operating margins recovered to 14% in Q2 2024, a significant improvement from the 11% seen in previous quarters. Management maintains a long-term EBITDA target of 13-14%. While the high-margin SupremeServ (aftermarket) business is targeted to grow from 15% to 25% of the mix, this benefit is currently being offset by the rapid growth of lower-margin segments like Solar and FGD (Flue Gas Desulphurization) projects.

    04

    Valves Division: A Standout Performer

    The Valves division has emerged as a major success story, achieving its highest-ever sales in Q2 and a turnover of ₹350 crores last year. Margins in this segment have stabilized at a healthy 12-13%, up from previous years where the segment occasionally faced losses. The company is now expanding into the massive ball valve market, which management estimates at over ₹20,000 crores, albeit starting with a gradual assembly and labeling approach.

    05

    Strategic Expansion in New Verticals

    KSB is diversifying into several new high-potential areas, including Railways (breakthrough contracts with Siemens and ABB for locomotive pumps), Fire-fighting (qualified for FM/UL standards), and Green Hydrogen. While these segments are currently small (e.g., ₹25 crores in fire-fighting YTD), they represent significant future growth levers as the company leverages its engineering expertise to fill market gaps.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.