Saral Gyan Hidden Gem - July 2011

EQUITY RESEARCH REPORT

WPIL LTD.

BSE CODE: 505872

Industry: Industrial Machinery CMP: Rs. 195.65 (24/07/2011) Market Cap: 156 (Crores) Target Price: Rs. 460.00 Date: July 24, 2011 Time Period: 18 – 24 months

Saral Gyan Capital Services www.saralgyan.in

An Independent Equity Research Firm

http://www.saralgyan.in/

HIDDEN GEMS – JULY 2011

TABLE OF CONTENT

S.No Content Page No. 1. Company Background 03 2. Recent Developments 11 3. Financial Performance 12 4. Charts & Graphs 14 5. Peer Group Comparison 16 6. Key Concerns 16 7. Saral Gyan Recommendation 17 8. Disclaimer 18

- 2 - SARAL GYAN CAPITAL SERVICES


1. Company Background WPIL Limited dedicates itself to the cause of total customer satisfaction. The Company has a rich experience of more than 50 years in Designing, Developing, Manufacturing, Erecting, Commissioning and Servicing of Pumps. Either with the help of erstwhile foreign collaborators such as JOHNSTON PUMPS for Vertical Turbines, HAYWARD TAYLOR for Submersibles and WORTHINGTON for Horizontals; or with the in‐house R&D recognised by the Ministry of Science and Technology, Govt. of

India, it has grown into one strong brand‐WPIL. Understanding the importance of need based operation WPIL Limited now offer System Engineering and complete solutions to all kinds of water and waste water handling and transportation needs

WPIL GHAZIABAD PLANT

Historical Benchmarks:

1952 Johnston Pumps India ‐ A JV of Johnston, US.

1982 License from Hayward Tyler, UK for Submersible motor.

1983 Worthington Pumps India Ltd ‐ JV of Worthington.

1990 1st 2 x 500 MW CW Pump order for NTPC Farakka.

2003 First turnkey contract from NTPC Vindyachal 500 MW

2005 Turnkey project for Bagjola Drainage Pumping Station

2006 Major Sea water Pumps (DuplexSS) for Saudi Arabia‐JANA.

2008 WPIL‐CLYDE JV is formed



PRODUCTS

Vertical Turbine Pumps Range: Capacity upto 40,000 M³/Hr Power: upto 4000 kW Vertical Mixed Flow & Axial Flow Pumps Range: Capacity upto 45,000 M³/Hr Power: upto 1500 kW No. Of Models: 88‐178

Submersible Pumps Range: Capacity upto 2400 M³/hr, Power: Upto 750 kW Speed: 2900/3500 RPM & 1460 /1760 RPM Power Supply: 50 & 60 Hz

Horizontal Centrifugal Pumps (Worthington and own Design)

Range: Capacity up to 15,000 M³/Hr Head upto 190Mtr



APPLICATIONS:

1. Water Supply

Applications :

Raw Water from River / Sea Clear Water Deepwell Water

Pumps :

Vertical Turbine, Mixed & Axial Flow Pumps Submersible Pumps Horizontal Splitcase

Some Of The Installations :

Cmda, Cmwsa, Kolkata Delhi Water Supply City Of Houston, Usa Pdam ‐ Loa Kulu, Indonesia

2. Irrigation

Source Of Water :

River / Lakes / Canals Deep TubeWells

Types Of Pumps To Offer :

Vertical Turbine / Mixed & Axial Flow Pumps Submersible Pumps Horizontal Split Case Pumps

Some Of The Installations :

Sunghaidareh, Indonesia Kosi Canal , Nepal Basantpur, J&K Tekepar, Maharastra Barishal Lift Irrigation‐B’desh Bagjola Drainage ‐ Kolkata Vientiane Province ‐ Lao PDR



3. Thermal Power Plant

Applications :

Circulating Water Auxiliary Cooling Water Ash Water Pump General Service Water

Pumps :

Vertical Turbine, Mixed Flow Pumps Submersible Pumps Horizontal Splitcase Pumps

WPIL PUMPS INSTALLED IN MAJOR THERMAL POWER PLANTS IN INDIA

Some Of The Major Installations :

Ramagundem STPP., NTPC. Capacity : 1500 M3 / HR. Singrauli STPP., NTPC. Capacity : 16,500 M3 / HR. Farakka STPP., NTPC. Capacity : 31,500 M3 / HR. Talcher STPP., NTPC. Capacity : 33,100 M3 / HR. Budge Budge TPS., CESC. Capacity : 15,500 M3 / HR. Panipat TPS., HSEB. Capacity : 15,000 M3 / HR.

4. Fire Fighting

Pumps follow NFPA 20 rules

Applications :

Main Pumps Jockey Pumps

Pumps :

Vertical Turbine Pumps Horizontal Split Case Pumps


Melbourne Port Corpn, Australia, 1100m3/Hr Sea Water Haldia Port. W. Bengal, 625 Hp Engine Mangalore Refineries Ltd. Capacity: 800 M3/Hr. Gas Authority Of India Ltd. Capacity: 410 M3/Hr. Madras Refineries Ltd. Capacity: 410 M3/Hr.



5. Sea Water

Applications :

Aquaculture Raw Water Pump Shipyards ‐ Dry Dock Power Plants Offshore Platform Fire Water

Pumps To Offer :

Vertical Turbine / Mixed & Axial Flow Pumps Submersible Pumps


Coromondal Fertiliser, Capacity Birla Periclase, Visakhapatnam. Capacity : 4500 M3 / HR Trans Water technologies, Malaysia. Capacity : 600 M3 / HR Ship Bldg. Centre, DMDE Machinery Test Centre. Capacity : 3500 M3 / HR Hindustan Petroleum, Vizag. Capacity : 4542 M3 / HR Food Agriculture Corpn. Rome, Italy. Capacity : 3400 M3 / HR Hitide Sea Farms ‐ Bangalore. Capacity : 1200 M3 / HR Jubail Chemical Industries Co. Saudi Arabia : 6,500 M3 / HR National Thermal Power Corporation ‐ Shimadri : 31,000 M3 / HR ( under execution )

6. Mining & Offshore

Applications :

Mine Dewatering Offshore Platform Sea Water Lift Offshore Platform ‐ Fire Water

Type Of Pumps:

Vertical Turbine Pumps Submersible Pumps


More Than 100 Submersible Pumps Of 250hp At Neyveli Lignite, India. ONGC ‐ Offshore Platforms Eastern Coal Fields & Bharat Coking Coal‐Submersible & Vertical Turbine Pumps



7. Nuclear Power Plant

Applications :

Cooling Water Pumps Auxiliary Cooling Water Pumps

Type Of Pumps:

Vertical Turbine / Mixed Flow Pumps


Nuclear Power Corporation Kakrapar Atomic Power Project 8. River Water Pumping ‐ Inclined installation

Applications :

Irrigation Water Supply Drainage


10 Sets of 24" Mixed Flow Pumps. Capacity : 3600 M3 / HR. Each for Thanh Diem Project, Vietnam, under Ministry of Agriculture & Rural Development 6 Sets of 18" Mixed Flow Pumps. Capacity : 2000 M3 / HR. Each for Camthuy Project, Vietnam, under Ministry of Agriculture & Rural Development



RESEARCH AND DEVELOPMENT R & D facilities of the company are considered one of the best in the industry and recognized by government of India. APPLICATION SOFTWARE IN CADD Hydraulic development software for development and Graphic generation of Hydraulic Profile of Meridional Section R‐O Plot of Turbine, Mixed Flow and Axial Flow Pumps. TRANSIENT ANALYSIS WPIL Limited has developed software capable of predicting transient pressure, locating the column separation zone at any section in the piping network and runout speed, pressure as well as flow characteristics of the main pumps following sudden flow interruption. SEISMIC ANALYSIS WPIL Limited can prove the adequacy of the structural design of the pump under possible seismic excitation as per customer requirement. Seismic study was done for pumps supplied to Kakrapar Atomic Power Project . SUMP MODEL STUDY WPIL Limited have developed the expertise of conducting sump Model Study to guarantee suitable design for uniform and unidirectional flow conditions without any turbulence, eddies, cortexing as per the norms of Hydraulic Institute USA. The company has successfully accomplished assignments for CW Pumping System of Panipat Power Station of Harayana State Electricity Board, Panipat, Kakrapar Atomic Power Project of Nuclear Power Corpn., and for many others. Study will be conducted at Calcutta Plant or at an Independent Technical Institute. VIBRATION SELECTION SOFTWARE ON DBASE‐III IN‐SITU VIBRATION PROBLEM AND ANALYSIS UPGRADATION At its Research and Development cell WPIL Limited is continuously working on the upgradation of various Mechanical and Hydraulic feature of the pumps. The company helps its clients by installing upgraded features in pumps supplied earlier to increase reliability, life extension and for energy conservation. Further details please see Refurbishment.



CORPORATE ENGINEERING CENTRE Corporate Engineering Centre recognized by Department of Science & Technology, Government of India.

R&D Team with a perfect blend of Knowledge and Experience. Intelligent Engineering Solutions for Pumps and Pumping Systems. State‐of‐the‐art Software‐n‐Hardware facilities. One of the Largest Pump Testing Facilities in India. Technical tie‐up with Research & Engineering Institutes.

SPECIAL ENGINEERING ANALYSIS

Hydraulic Transient Waterhammer Analysis. Sump, Forebay and Water carrier channel design. Water carrier piping network analysis.

EXECUTION ENGINEERING SERVICES

Supervision of equipment and system erection and commissioning. Pump trouble‐shooting service. On‐site pump performance study and technical feedback to R&D



2. Recent Developments

WPIL Acquires Mathers Foundry Ltd., July 11, 2011.

WPIL through its International subsidiary, WPIL International (Singapore) has acquired 100% shareholding of Mathers Foundry Ltd.

Mathers is the leading steel foundry in the world for the supply of high integrity castings to the Pump Industry with the patent to the ZERON LICENSE. The Company is also one of the few suppliers to the Global nuclear industry with both European approvals and the prestigious NSSA approval to supply to the Chinese Nuclear Industry. This is a historic achievement for WPIL as it places it at the forefront of pump technology with access to the most sophisticated pump manufacturing materials especially for sea water and the nuclear industry.

WPIL Acquires 51% stake in Sterling Pumps, April 28, 2011

WPIL Limited (formerly Worthington Pumps India Limited) has joined forces with Sterling Pumps Pty Ltd. by acquiring a substantial 51% share of the Australian manufacturer. WPIL with its strong heritage of Worthington and Johnson design pumps is a global player in large engineered water handling pumps for the power, municipal mining and oil and gas sectors. The investment will be used to strengthen Sterling's manufacturing and product support base and expand the sales of WPIL's product range in Australia.

"The management and staff at sterling pumps are pleased to welcome WPIL as a major partner. This partnership will see Sterling grow into a significant manufacture and supplier of high quality pumping equipment”. ‐Anton Merry Sterling Pumps.

"WPIL Limited is pleased to have found an ideal partner in Sterling Pumps to strengthen its presence in the Australian market and further its global ambitions". ‐Prakash Agarwal, Managing Director, WPIL Limited.

WPIL Limited has floated a subsidiary Company in Singapore in the name of "WPIL International Pte. Ltd." for development of its global business by contributing to 51 % of the total paid up Share Capital of the Company.



3. Financial Performance WPIL net profit rises 57.33% in the March 2011 quarter Net profit of WPIL rose 57.33% to Rs 7.30 crore in the quarter ended March 2011 as against Rs 4.64 crore during the previous quarter ended March 2010. Sales rose 16.69% to Rs 86.08 crore in the quarter ended March 2011 as against Rs 73.77 crore during the previous quarter ended March 2010. For the audited full year, net profit rose 17.65% to Rs 15.73 crore in the year ended March 2011 as against Rs 13.37 crore during the previous year ended March 2010. Sales rose 4.4% to Rs 220 crore in the year ended March 2011 as against Rs 210.71 crore during the previous year ended March 2010 WPIL net profit declines 18.92% in the Dec 2010 quarter Net profit of WPIL declined 49.86% to Rs. 1.78 crore in the quarter ended December 2010 as against Rs. 3.55 crore during the previous quarter ended December 2009. Sales declined 22.51% to Rs. 40.63 crore in the quarter ended December 2010 as against Rs. 52.43 crore during the previous quarter ended December 2009

Last 6 Quarters Net Sales & Profit

52.43

73.77

45.86 47.4340.63

86.08

1.787.3

3.524.643.55 3.14

0

10

20

30

40

50

60

70

80

90

100

Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11

Rs

in C

rore

s

Net Sales 52.43 73.77 45.86 47.43 40.63 86.08

Net Profit 3.55 4.64 3.14 3.52 1.78 7.3

1 2 3 4 5 6



Current & Expected Earnings:

Particulars (Rs. In Crores) Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 E Sep '11 E Audited / Unaudited UA UA UA UA UA UA

Sales Turnover 45.72 47.29 40.62 85.85 78.45 86.67

Other Income 0.14 0.14 0.01 0.23 0.34 0.26

Total Income 45.86 47.43 40.63 86.08 78.79 86.83

Total Expenses 39.91 40.68 36.22 74.15 63.23 69.65

Operating Profit 5.81 6.61 4.4 11.7 15.22 17.02

Total Extraordinary Inc/Exp ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐

Tax On Extraordinary Items ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐

Net Extra Ordinary Inc/Exp ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐

Gross Profit 5.95 6.75 4.41 11.93 15.66 17.28

Interest 0.7 1.02 1.27 1.29 1.77 1.98

PBDT 5.25 5.74 3.14 10.64 13.89 15.30

Depreciation 0.41 0.43 0.44 0.43 0.44 0.44

Depreciation On Assets ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐

PBT 4.84 5.31 2.7 10.21 13.45 15.74

Tax 1.7 1.79 0.92 2.91 4.16 5.21

Net Profit 3.14 3.52 1.78 7.3 9.29 10.53

Prior Years Income/Expenses ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐

Earnings Per Share 3.94 4.41 2.23 9.16 11.66 13.21

Equity 7.97 7.97 7.97 7.97 7.97 7.97

Reserves ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐

Face Value 10 10 10 10 10 10

% of Public Share Holdings 27.32 27.32 27.32 25.51 ‐‐ ‐‐

Expected Earnings for 1st and 2nd Qtr FY 2011‐12: We expect WPIL Ltd to deliver robust earnings in coming quarters. Company can synergize its operation on account of recent acquisition of Sterling pumps and Mathers Foundry Ltd. WPIL has shown excellent performance in last quarter of FY 2010‐11 and we believe that the recent acquisitions will benefit WPIL tremendously by giving access to broader market.



4. Charts & Graphs i) Share Price Moving Average: WPIL Ltd is currently trading near to its 50 days and 200 days price moving average. WPIL is having support at 175 Rs levels.

ii) Comparative Graph: WPIL Ltd has outperformed Sensex giving returns of 216.33% in last three year. In last one year WPIL Ltd has underperformed giving negative returns of 17.66% against Sensex positive returns of 13%.



iii) Performance Chart:

iv) Share holding Pattern: Promoters share holding was 72.68% since last 3 years but after Dec 2010 Promoters have increased their holding by 1.8% making open market purchase. Promoter holding stands at 74.48%.



5. Peer Group Comparison

PEER GROUP WPIL Ltd Andrew Yule Eimco Elecon

Elgi Equipments

Kabra Extrusions

CMP 195.65 23.70 225.00 80.00 56.40

52 W H/L 279.00/150.00 47.75/21.10 398.00/213.00 213.00/72.15 206.50/50.60

Market Cap 155.88 755.17 130.94 1266.84 179.93Results (in Crores) Mar‐2011 Mar‐2011 Mar‐2011

Mar‐2011 Mar‐2011

Sales 85.85 75.49 55.47 197.13 72.91

PAT 7.30 23.65 3.54 14.45 9.37

Equity 7.97 63.73 5.77 15.85 15.95

EPS 19.75 0.43 23.22 5.14 8.09

P/E 9.91 55.12 9.78 15.55 6.97

6. Key Concerns / Risks

The presence of all major international pump companies in India would be a threat to Company's growth.

Delay in enough investment in Power sector, increase of operational cost and

import substitution is the cause of concern in coming years.



7. Saral Gyan Recommendation i) Company management is ambitious to achieve high growth targets in current fiscal year. Company’s joint venture with Clyde Union Pumps for manufacturing special pumps for thermal plants and nuclear power plants is expected to bring good business in future. ii) In recent buyout, WPIL acquired UK based Mathers Foundry which makes steel castings used in equipment for the oil and gas, nuclear, paper, chemical and power generation sectors. Mathers is the sole manufacturer of castings in the ZERON range of Super Duplex alloys. ZERON is a super duplex stainless steel (with high strength and corrosion resistant) that resists all forms of corrosion attack in seawater service. This buyout can open new doors for WPIL in terms of business scalability and expertise. iii) WPIL is showing steady growth since 2006 and now increased its thrust in waste water treatment, mining and power plant related pumping systems. Promoters have recently increased their holding by 1.8% making open market purchase during last quarter. Increase in promoters holding after 3 years from 72.68% to 74.48% is an encouraging factor and gives confidence in growth prospects of the company. iv) The operating margins have improved substantially and are expected to sustain at current levels. Company has delivered decent growth by taking organic as well as inorganic route without diluting its equity. v) At current market price of Rs 195.65, dividend yield works out to be 1.02%. On equity of Rs. 7.97 crore the estimated annualized EPS for FY 2011‐12 works out to Rs. 42 and the Book value per share is Rs. 61.53. At a CMP of Rs. 195.65, stock price to book value is 3.18. Currently, the scrip is trading at 4.5X FY 2011‐12 estimated earnings which make it an attractive buy at current market price. Saral Gyan Team recommends “BUY” for WPIL Ltd. at CMP of Rs. 195.65 for a target price of Rs. 460 over a period of 18‐24 months. Suggested Buying Strategy:

Buy at Current Market Price (Range: 190 ‐ 196) – 50% of you Buy if stock price corrects by 20% (Range: 170 ‐ 175) – 50% onvestment Rationale

r investments.

I f your investments.



8. Disclaimer Important Notice: Saral Gyan Capital Services is an Independent Equity Research Company. Disclosure: The author of this article does not hold shares in the recommended company. © SARAL GYAN CAPITAL SERVICES This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Saral Gyan Capital Services (www.saralgyan.in) or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.


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Saral Gyan Hidden Gem - July 2011

Investor Relations