Kirloskar Oil Engines soars 11%, hits over 4-year high on strong Q2 results

Shares of Kirloskar Oil Engines (KOEL) surged 11 per cent to hit an over four-year high of Rs 326.60 on the BSE in Wednesday’s intra-day trade.

In the past three trading days, the stock has rallied 14 per cent after the company reported a strong performance in quarter ended September 2022 (Q2FY23). It was trading at its highest level since August 2018.

KOEL is a leader in the 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 against Rs 41.7 crore in Q2FY22. Revenue from operations grew 23 per cent to Rs 1,228 crore from Rs 1,001 crore in the year ago quarter. Earnings before interest, taxes, depreciation, and amortization (ebitda) margin 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 and better exports and customer support segment. Overall profitability was aided by favourable financial services EBIT margin of 78.7 per cent. Electric pumps and other (farm mechanization and water-management solutions) saw losses due to lower cost absorption, said Anand Rathi Share and Stock Broker in a company update.

The brokerage believes strong demand across segments, sharper focus on exports, management thrust and efforts to enhance operations augur well for coming years. New emission norms (CPCB4+, BSVI) would help it increase traction internationally; it said and maintained ‘buy’ rating on the stock with a target price of Rs 374 per share.

Meanwhile, in the past three months, the market price of KOEL has appreciated by 86 per cent as compared to a 3.6 per cent rise in the S&P BSE Sensex. It had hit a record high of Rs 450 on December 26, 2017.

At 12:27 pm; the stock was trading 9 per cent higher at Rs 320.50 against a 0.16 per cent gain in the benchmark index. The average trading volumes on the counter jumped nearly three-fold with a combined 2.4 million shares having changed hands on the NSE and BSE.