Tuesday, October 27, 2009

WPIL Ltd – Pump Priming

No, this article is not about government action to stimulate the economy. Rather, it is about a pump company that is priming itself for a big new opportunity that is likely to open up for the sector.

WPIL (formerly Worthington Pumps India Ltd) is a 57 year old company based in India that designs, manufactures & services various types of vertical, horizontal & submersible pumps, for application in various sectors – water supply, mining, power, irrigation, fire-fighting, offshore etc

The company has a complete range of facilities - Design, Casting (own foundries), Pattern Manufacture, Fabrication, Manufacture , Quality Assurance and Testing.

The company's R&D facilities are considered among the best in the industry, apart from being recognised by the Ministry of Science & Technology, Govt of India. The company's quality systems are certified as per ISO 9001:2000 & ISO 14001:2004. It boasts of the largest test bed in the country at Panihati. Testing as per various international standards ISO, HIS, PTC & BS are undertaken.
Promoter Group
WPIL used to belong to the B M Khaitan group before the group sold a controlling stake to the Hindustan Udyog group in 2002. Thereafter in 2006 the B M Khaitan group sold their residual stake too, leaving the Hindustan Udyog Group in total control.

Since then, the company has improved it’s performance by leaps & bounds. Whereas Sales have increased from 73 Cr in FY06 to 159 Cr in FY09, Net Profits have risen from 0.5 Cr in FY06 to 8.3 Cr in FY09.

WPIL - Historical Benchmarks :
1952 - Commenced Business Johnston Pumps India as JV of Johnston, US.
1982 - License from Hayward Tyler, UK for Submersible Motor.
1983 - JV with Worthington - name changed -Worthington Pumps India.
1990 - CW Pump - 33,100 M3/Hr, 2600 KW, 500 MW NTPC Power Stn.
1995 - Association -(Worthington-Ingersol Dresser) ends & name changed to WPIL.
1997 - Export Order ($1.7 Million) from Vietnam - Inclined Pump.
2000 - Major Break through - $4.44 Mill - Four Lao PDR Pump Station.
2002 - APGENCO - Vijaywada Thermal Power Station - CW Pump
2003 - Turnkey contract for large CW Pump - NTPC Vindhyachal : 500MW
2005 - Completing large turnkey project for Drainage Pumping Station in Bagjola near Kolkata comprising of 19 large Propeller Pumps
2006 - Major sea water pumps (Duplex SS) for Saudi Arabia - JANA.
2007 - Joint venture with Mitsubishi-Japan for contract for Concrete Volute Pumps to be supplied for Indian Project

WPIL has had major successes overseas & it's pumps have been exported to various countries around the world including the USA.

But what is particularly heartening in the current context are the steps the company is taking to be ready for the next big opportunity for the pumps sector in India – supplying specialized pumps to the nuclear power plants in India, which is anticipated to grow by leaps & bounds in the next decade, following the recent Indo-US Nuclear Deal. The deal will lead to the more efficient import of nuclear technology and equipment which will ultimately translate into higher nuclear power generation.

“Nuclear Ready“
WPIL has moved quickly post the Indo-US nuclear deal by forming a JV with a global pumps major ClydeUnion Pumps to manufacture Boiler feed / Concrete Volute and other special pumps for the conventional & super critical thermal plants, as well as nuclear power plants. The JV would be up & running by end 2010.

The JV aims to be a major player in the power and oil and gas markets. The JV would also be a major player in the anticipated Indian Nuclear market. The specialised pumps to be manufactured by the JV are presently not being manufactured in the Country.

WPIL has a 40% stake in the JV, which over the years will surely give a superb return on investment.

ClydeUnion Pumps
ClydeUnion Pumps is one of the world's leading pump companies - a centre of excellence in Pump Technology, Hydraulic Design and Engineering. It was formed via the merger of 2 venerable & reputed companies - Clyde Pumps , dating back to 1871, and Union Pump, started in 1885.

ClydeUnion Pumps operate in five key markets:
• Upstream Oil
• Downstream Oil
• Nuclear Power
• Conventional Power
• Water & Industrial

ClydeUnion Pumps has already secured major orders in 2009 in the Indian markets, where it will be supplying pumps for the 4000 MW Sasan Ultra Mega Project (it has bagged the order from the Chinese contractor Shanghai Turbo Machinery Co ) & the 1600 MW Krishnapatnam Power Project.

WPIL – Quick Facts
Website : http://www.wpil.co.in
Bse Code : 505872
CMP : 102.20 (Closing on BSE, 27th Oct , 2009)
Latest EPS : 10.39 Rs (FY09). EPS for Q1 of FY10 is Rs 2.79.

Recommendation : The company has shown a marked improvement in performance since 2006 when the present promoters took full control of the company. The pumps sector in India is booming & the company looks capable of making the most of the sector opportunity.

The management has also shown foresight in tying up with a foreign major to address the nuclear opportunity for the sector.

Keeping the above in mind, the author recommends investors to research & analyse this company in greater detail. The 2nd quarter results are due very shortly and will provide further data for analysis. The author feels that on steep corrections, and if held for the long term (5 years), the stock could prove to be a winner .

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at boscom@gmail.com .