Kirloskar group shares hit 52-wk highs; KOEL, KPCL up over 50% in 6 months

Shares of Kirloskar Group companies surged up to 7 per cent to hit their respective 52-week highs in Thursday’s intra-day trade, in an otherwise range-bound market.

Among individual stocks, shares of Kirloskar Oil Engines (KOEL) rallied 7 per cent to Rs 343.65 apiece and soared 20 per cent in the past four trading days. Shares of Kirloskar Pneumatic Company (KPCL), too, surged 7 per cent to Rs 635.45 apiece on Thursday, thereby, gaining 14 per cent in four days.

Shares of Kirloskar Industries, meanwhile, was up 3 per cent to Rs 2,080 in Thursday's intra-day trade. In comparison, the S&P BSE Sensex was down 0.07 per cent at 61,936.

That apart, in the past six months, KOEL (up 131 per cent), KPCL (53 per cent) and Kirloskar Industries (45 per cent) zoomed over 40 per cent, as against 14 per cent rise in the benchmark index.

Shares of KOEL traded at their multi-year highs after the company reported strong performance in the July-September quarter (Q2FY23). It traded at its highest level since August 2018.

KOEL is a leader in manufacturing of diesel engines, agricultural equipment, and generator sets with a sizable presence in international markets.

In Q2FY23, the company’s net profit nearly doubled to Rs 82.50 crore as against Rs 41.7 crore in Q2FY22. Revenue from operations, meanwhile, grew 23 per cent to Rs 1,228 crore in Q2FY23 from Rs 1,001 crore, in the year ago quarter.

Earnings before interest, taxes, depreciation, and amortization (ebitda) margin, too, improved 500 bps year-on-year and 20 bps sequentially to 14.7 per cent. The stronger margin reflects better-than-expected profits of the core business bolstered by price hikes, better exports, and customer support segment.

Therefore, analysts believe that a strong demand across segments, sharper focus on exports, management thrust, and efforts to enhance operations augurs well for the company in the coming years. New emission norms (CPCB4+, BSVI), too, would help it increase traction internationally.

According to analysts at HDFC Securities, KPCL seems to be in a sweet spot due to revival in capex by the government and private sector.

"The company's financial and operational metrics are sound. As a sector, capital goods has got re-rated over the past few months in anticipation of better order flows and execution, despite concerns of higher raw material costs. KPCL has set ambitious targets and could witness expansion in earnings and valuations," the brokerage firm said.

KPCL has a wide range of offerings that include air, refrigeration, gas compressors and systems, vapour absorption chillers and industrial gear boxes. It serves a range of sectors like steel, cement, cold chains, food and beverages, pharmaceuticals, railways, defence, marine with major exposure to pil & gas industry.

KPCL is a significant player in CNG business in India. It has established technology partnerships with leading global companies and research institutes. As on October 1, the order bank stood at at over Rs 1,200 crore, which remains more or less at the same level of the last quarter.

While several orders are in the process of finalization, KPCL expects order booking to improve in the next two quarters to propel growth in sales for FY24, keeping in line with its aspirational target.