Oswal Pumps shares a buy? Nuvama sees 42% upside on strong solar pump opportunity

Nuvama Institutional Equities has initiated coverage on Oswal Pumps Ltd, a manufacturer of solar pumps, citing its strong positioning at the intersection of agriculture and solar energy. The brokerage viewed Oswal Pumps as well placed to benefit from rising solarisation of agriculture, supported by its deep expertise in pump technology and in-house solar module manufacturing, which it believed delivered meaningful lifecycle cost benefits to both the government and farmers.

Nuvama estimated that Oswal Pumps would report a revenue, Ebitda and PAT compound annual growth rate of 21 per cent, 13 per cent and 11 per cent respectively over FY26 to FY28. The brokerage said growth was normalising from a high base, noting sharp expansion of 66 per cent in revenue, 86 per cent in Ebitda and 95 per cent in PAT over FY24 to FY26E. Its estimates also factored in a modest delay in the rollout of the PM KUSUM 2.0 scheme on a conservative basis, amid rising competitive intensity.

Nuvama valued the stock at 18 times FY28E earnings and set a March 2027 target price of Rs 720, implying an upside of 42 per cent from current levels. At the time of initiation, the stock was trading at 12.6 times FY28E earnings. The brokerage initiated coverage with a Buy rating. It flagged a significant delay or curtailment in the PM KUSUM scheme as the key downside risk.

Nuvama highlighted that the domestic pumps industry, valued at about Rs 38,100 crore, had compounded at 17 per cent over FY19 to FY25 and was expected to grow at a 9 per cent CAGR over FY25 to FY30E. It said agriculture pumps had driven most of this growth, increasing their share to 67 per cent of total pumps in FY25 from 48 per cent in FY19. Solar pump systems, largely used for agricultural applications, were valued at around Rs 16,500 crore in FY25 and were expected to post an 11 per cent CAGR over FY25 to FY30E, after more than doubling over FY19 to FY25. Nuvama viewed Oswal Pumps as a key beneficiary of this expanding market.

The brokerage said the agriculture sector was on the cusp of a technological shift towards solar pumps due to favourable cost economics for both farmers and the government. It cited industry estimates suggesting that India had more than 144 million farmers, of which only around 30 million had installed solar pumps, implying a long growth runway. Nuvama added that solar pumps were likely to remain viable even without subsidies over the longer term. It noted that the PM KUSUM scheme, particularly Component B covering off-grid solarisation of pumps, had seen strong adoption and created a virtuous cycle. Based on industry interactions, Nuvama expected PM KUSUM 2.0 to be larger in scale and simpler in execution.

Nuvama also pointed to Oswal Pumps’ strong integration capabilities, noting that the company manufactured several key components in-house, including solar modules which accounted for about 30 per cent of the bill of materials for solar pumps. This, in its view, allowed tighter cost control and greater flexibility to meet diverse requirements across government tenders, domestic demand and international markets, which currently contributed around 3 to 4 per cent of revenue. Beyond solar pumps, Nuvama said Oswal Pumps could also participate in opportunities such as the solar rooftop segment, estimated at Rs 30,900 crore in size, and exports, which were valued at around Rs 11,500 crore in FY25.