Head Above Water

There are a few companies that continue to perform well and yet fail to garner investor attention. But that doesn’t mean they aren’t worth a second look and in fact could turn out to be a good buy as a long-term proposition. WPIL, a Kolkata-based company, is one such scrip that has largely been ignored by the investor fraternity. But the way the company has performed both in terms of its topline and bottomline over the last three years, coupled with its good growth visibility, should certainly make it a tempting offer with its CMP of Rs 67.

WPIL is a company with a difference as it is not only engaged in the manufacturing and supplying of pumps but has also leveraged its engineering capability and experience to provide turnkey execution for water handling projects. Through these various types of pump products and services it caters to sectors such as power, municipal projects, irrigation and the water supply and industrial sectors. The company has been growing at a three-year CAGR of almost 30 per cent in the topline and a whopping 151.28 per cent in its bottomline. Moreover, what makes this company quite attractive is the fact that it has performed to its best capability in FY09 even when India Inc was reeling under the pressure of economic slowdown and growing only in single digits. This indicates the inherent strength of this counter.

It should be noted that the company has consistently improved its margins. In fact, when other companies were trying to maintain their margins in FY09, WPIL had successfully expanded its operating and net margins by 84 basis points and 67 basis points respectively. That apart, we believe that the company will maintain its good growth run in the coming years. The reasons for this are simple. First, at the beginning of FY10 itself the company has a strong order book position, which would be executed from the current fiscal onwards. WPIL’s order book stood at Rs 300 crore, which is 1.88x its FY09 sales and thus provides good revenue visibility for the year. Second, the company through its products caters mainly to the power and the irrigation sector. It should be noted that the FY10 budget has laid out huge allocations for both these sectors to the tune of approximately Rs 43,000 crore and this opens up excellent business opportunities for WPIL. For FY09, WPIL’s topline increased 42.55 per cent to Rs 166.07 crore (Rs 116.49 crore) while its bottomline during the same period increased by 67 per cent to Rs 8.27 crore (Rs 4.95 crore). This brisk growth, both in sales as well as profits, was not only due to capacity expansion, but also due to enhanced market penetration in the irrigation and industrial sectors. In fact WPIL's annual report also states that the company has planned for enhanced infrastructure requirement and technical expertise. Thus it indicates towards some capex this fiscal as well. Going ahead, the management is planning to get more aggressive in FY10 and intends to consolidate its market presence further. On a market cap of Rs 53.38 crore, WPIL's market cap to sales comes to 0.32x, while at FY09 EPS of Rs 10.23, PE stands at 6x. But with EV/EBIDTA of just over 4x, WPIL, a T-group company, looks like a grab with one year price target of Rs 90.