Rs.
132
M
& P Pumps
Pumped
up
M
& P Pumps (MPPL) was originally established in Manchester, U.K. in 1845 for
designing
and
supplying multi-stage centrifugal pumps. Over the years, it established
manufacturing
plants
across the globe in South Africa, Ireland and India. The Pune operations commenced
in
1959. In 1985, Mather & Platt split and sold off
worldwide.
In
1987, Mather & Platt India became a member of the
Jumbo Group, Dubai. Mather &
Platt
Pumps
came into existence with the de-merger of the fluid engineering division
from
Mather
& Platt India.
The company was part of the Jumbo Group owned by the Chhabria
family.
In
Mid 2005, Germany-based Wilo AG acquired the Indian
promoter’s 62% stake in the
company.
Consequently, Wilo made an open offer to acquire 1.85
million shares from the
public
at Rs 109.32 per share. Wilo
currently holds 62.84% stake in the company.
MPPL
is engaged in the business of design, development, manufacture, installation
and
servicing
of centrifugal pumps/valves and contracts of pumping systems on turnkey
basis.
The
company caters to diverse industries namely, Power plants (for circulation,
boiler feed,
de-scaling,
condensate extraction, cooling towers), Municipal water supply and
distribution,
Sewage
and effluent transport, Petrochemical & Fertiliser, Pumps for fire fighting
sector
covering
major industries, ports, power plants, building services etc., Steel, Mining,
Water
Supply,
Irrigation, Municipal Services and Pulp and Paper Industry.
M&P products have
inherently
better Hydraulic Design resulting in higher efficiency and lower
power
consumption.
Consequently,
business prospects are linked to investment in urban infrastructure,
power
generation
and capex in industrial end
users.
Strong
German parent
Wilo
is one of the leading international suppliers of pumps and pumping systems. It
is
ranked
among the top 10 pump manufacturers of the world. The Wilo group’s business
segments
are Heating, refrigeration and air-conditioning, Water supply and sewage
lifting.
Wilo
has been extending business activities in water supply & sewage and
industrial
pumps
and is seeking to increase presence in the Asian market which is growing
the
fastest.
Towards this end it has earlier made the acquisition of EMU in Germany for
entering
the
municipal sewage and now MPPL to enter in the domain of industrial pumps. Each
of
its
manufacturing facility specialises in a specific line of pumps. Wilo has also acquired
another
Mather & Platt group company, Mather & Platt Fire Systems.
Sensex:
14994 Nifty: 4574
Wilo
expects its main growth impulse from Asian, Eastern & South Eastern
European
markets.
Furthermore, the pump group strives to gain noticeably more market shares
in
climate
control, water supply and waste-water management. These segments are
showing
marked
growth worldwide.
Wilo’s
reputation has helped MPPL in getting orders faster.
Wilo
has given the company a new lease of life
Established
in 1870, MPPL is historically well-known for high split case pumps. Its strong
technological
capability has earned it strong goodwill. However the company suffered
due
to
its financial problems. Ever since the Chhabria group
took over the company from 1988,
the
financial condition kept on deteriorating.
Though
orders were good, the supply of raw material, spares etc never met the
requirement,
nor
anything was done from management side to make the system productive and
rational.
MPPL
had to pay high price for raw materials, which affected the margins. There
were
continuous
problems on part of working capital and productivity. The company had
to
take
high interest loans from co-operative banks.
Since
the management hardly took any interest on the core business of the company,
this
lead
to huge debtors pile up and also more bad debts. For FY 2005, the company wrote
off
Rs
12 crore as bad debts and further Rs 2.69 crore during nine months
ended Dec’05.
This
fell to 68 lakh in FY 2006 and nil in FY 2007. Thus
the company has mostly cleaned up
the
balance sheet.
MPPL
specializes in the fast growing water supply segment
MPPL
is specialized in High split case pumps (one type of
centrifugal pumps). Such pumps
are
used for water supply related activities. Thus the usage may vary from pumps of
2 hp
used
in residential locality for supply of water and to 1000hp in power plants. The
demand
for
such pumps come from existing and new commercial and residential buildings,
power
plants,
steel plants, cement plants and all such industries where water requirement
becomes
an
integral part of the project. The new power projects,
steel and cement projects that are
coming
up will assure strong growth of such large pumps in future. Thus, the
strong
investment
climate in industry and infrastructure sectors continues to lend support
for
sustainability
of a strong growth in the industrial and infrastructure pumping
solutions
business.
MMPL is well placed to capitalize on the pump business
boom.
The
customers include, in refineries (BPCL, Reliance Ind,
HPCL), in Power (NTPC, PGCL,
Reliance
Energy), in steel (Tata Steel, Bhusan steel, Jindal Steel), in
irrigation and water
supply
(BMC, Maharashtra Jivan
Pradhiyan (MJP), Maharashtra
Krishna Valley Irrigation
(MKVI)
etc).
MPPL
has several growth strategies in place
Focus
on growing product segments:
Wilo will be making its line of water supply,
drainage/
sewage
and HVAC pumps at MPPL. The former has strong potential with 15-20%
growth
in
the domestic and East European markets and in any case is the largest market
globally.
The
HVAC segment is a growing segment across Asia whose growth is dependent
on
construction
activity and building construction norms. (e.g.
Elimination of overhead tanks
has
resulted in booster pump installations in high-rises to deliver
water).
The
company has expansion plans on three fronts: Facilities, Products and Research
&
development.
Test Bed at Chinchwad Works is being modernized to
handle higher capacities
and
larger number of pumps. The production facility will have additional CNC
machines to
meet
increasing demands. The company has commenced manufacturing the WILO
range
of
pumps at its Kolhapur unit built with the world class
state of art technology leading to
global
quality products. The company anticipates great prospects for these
products.
Utilization
of Wilo’s distribution network:
Wilo’s comprehensive distribution
network
will
be used to market MPPL’s existing products in energy,
chemical industry and irrigation.
Wilo
has 44 marketing outlets across the globe and a very strong presence in the
east-
European
markets.
Entry
into growing markets:
The fastest growing pump markets are in Asia and Eastern
Europe
where a lot of activity is occurring in waste-water and municipal water supply
and
construction.
MPPL will have access to both through Wilo’s
comprehensive presence in
Europe
and its Korean and Chinese operations.
MPPL
and Wilo have lots of untapped
synergies
The
new parent plans to utilize MPPL’s manufacturing
capacities for producing and selling
centrifugal
pumps for which Wilo currently has no product (energy,
chemical industry and
irrigation)
in its worldwide Wilo sales organizations. MPPL has
sufficient production facilities
at
its Pune plant.
Furthermore,
MPPL is also planning to venture into manufacturing small and
horizontal
pumps
using the technology of WILO group. Initially such pumps will be imported
and
assembled
in the factory and later on the entire manufacturing base will be set up in
the
factory.
Thus,
both the companies will conglomerate the products as, Wilo will be able to utilize the
technology
advantage of MPPL and selling the products made by MPPL outside
India
through
its 44 subsidiaries worldwide, while MPP will be able to cater to the small
and
horizontal
pump market in India by selling Wilo’s products. Also
going forward, Wilo plans
to
establish MPPL as a manufacturing hub for its products considering the labour
and
manufacturing
cost advantage in India. All these synergies will reflect in the
company’s
financials
in the long-term.
Financials
are pumping up
For
the fourth quarter ended December 2007, MPPL registered sales growth of 60% to
Rs
67.09
crore. OPM improved by 440
basis points from 11.7% to 16.1%. This took OP up by
119%
to Rs 10.77 crore.
PBT
grew 84% to Rs 8.14 crore
and PAT was up 94% to Rs 5.21 crore.
For
the year ended December 2007, its sales grew 38% to Rs
181.88 crore and PAT was up
8%
to Rs 10.1 crore.
The
company has been able to deliver impressive results due to the initiatives taken
by the
management
in controlling costs, optimization of product mix and better working
capital
management
and its endeavor in exploring export opportunities in
Europe, Africa and
Middle
East and South-East Asia.
Valuations
With
rising capital expenditure in putting up large scale steel plants, cement
plants, refineries,
power
plants in the country and the thrust of the government on irrigation projects,
ensuring
water
supplies to villages and expansion of sewage handling & treatment facilities
for
growing
urban areas, the demand for water & sewage pumps is expected to
grow
impressively
in the years ahead.
In
FY 2008 (ending December), we expect the company to register sales of Rs 233.53 crore
and
PAT of Rs 13.67 crore. On
equity of Rs 9.23 crore and
face value of Rs 10 per share,
EPS
works out to Rs 14.8. The share price trades at Rs 132. P/E works out to just 9.0.
FINANCIALS
NET
OPM OP OI. PBIDT INT. PBDT DEP. PBT EO PBT TAX PAT PRIOR PAT
EPS
SALES
(%) BEFORE EO AFTER EO PERIOD ITEMS AFTER ADJUST
0812
(12P) 233.53 13.0 30.45 0.84 31.29 7.50 23.79 2.09 21.7 0.00 21.70 8.03 13.67
0.00 13.67 14.8
0712
(12) 181.88 11.2 20.43 1.29 21.72 5.12 16.60 1.61 14.99 0.00 14.99 5.69 9.30
0.00 9.30 10.1
0612
(12) 131.37 13.2 17.35 1.08 18.43 2.65 15.78 1.24 14.54 0.68 13.86 5.28 8.58
0.00 8.58 9.3
0512
(9) 67.12 10.0 6.68 0.29 6.97 2.24 4.73 0.96 3.77 2.69 1.08 0.61 0.47 0.00 0.47
#
0503(12)
89.46 20.7 18.55 1.97 20.52 3.58 16.94 1.16 15.78 12.00 3.78 3.13 0.65 0.00 0.65
11.1
*
On current equity of Rs 9.23 crore: Face Value of Rs 10 per
share. # EPS cannot be annualised due to seasonality of business. EO:
Extraordinary items. EPS
is calculated on PBT before EO
and
relevant tax. Figures in Rs crore. (P):
Projections.
M
& P PUMPS: RESULTS
0712 (3) 0612
(3)
VAR. (%)
0712 (12)
0612 (12)
VAR. (%)
Net
sales
67.09
41.99
60
181.88
131.37
38
OPM(%)
16.1 11.7
11.2
13.2
OP
10.77
4.91
119
20.43
17.35
18
Other
inc.
-0.18
0.46
PL
1.29
1.08
19
PBIDT
10.59
5.37
97
21.72
18.43
18
Interest
2.00 0.62
223
5.12
2.65
93
PBDT
8.59
4.75
81
16.60
15.78
5
Dep.
0.45
0.32
41
1.61
1.24
30
PBT
before EO
8.14
4.43
84
14.99
14.54
3
EO
0.00
0.00
—
0.00
0.68
-100
PBT
after EO
8.14 4.43
84
14.99
13.86
8
Tax
2.93 1.75
67
5.69
5.28
8
PAT
5.21 2.68
94
9.30
8.58
8
EPS
#
#
10.1
9.3
*
On current equity of Rs 9.23 crore: Face Value of Rs 10 per
share.
EO:
Extraordinary items.
#
EPS cannot be annualised due to seasonality of business.
EPS
is calculated on PBT before EO and relevant tax.
Figures
in Rs crore.
|
STOCK
DATA SECTOR
: Pumps BSE
Code :
532469 NSE
Code :
- Bloomberg
:
MPP IN Reuters
:
MAPP.BO 52-week
High/Low :
Rs 280 / 123 |
SHAREHOLDING
PATTERN* Total
Foreign 7.32 Total
Institutions 0.03 Total
Govt Holding 0 Total
Non Promoter Corporate
Holding 6.18 Total
Promoters 62.84 Total
Public & Others 23.64 Totals
100 *
as on 31st
December
2007 |
|
Wilo
expects its main growth impulse
from Asian, Eastern &
South Eastern European markets.
Furthermore, the pump
group strives to gain noticeably
more market shares
in climate control, water
supply and wastewater management.
These segments
are showing marked
growth worldwide |
The
new parent plans to utilize
MPPL’s manufacturing capacities
for producing and selling
centrifugal pumps for which
Wilo currently has no product
(energy, chemical industry
and irrigation) in its worldwide
Wilo sales organizations.
MPPL has sufficient
production facilities at
its Pune plant |
|
The
company has been able to
deliver impressive results due
to the initiatives taken by the
management in controlling
costs, optimization
of product mix and
better working capital management
and its endeavor
in exploring export opportunities
in Europe, Africa
and Middle East and South-East
Asia |
Strong
investment climate in industry
and infrastructure sectors
will help this 63% subsidiary
of a German company
grow on sustainable
basis |
PREPARED
BY : Avtar Kataria