Buy Kirloskar Brothers Ltd For Target Rs. 2,070 - Axis Securities Ltd
Est. vs. Actual for Q4FY25: Revenue: MISS; EBITDA: MISS; PAT: MISS
Changes in Estimates post Q4FY25
FY26E/FY27E: Revenue: -1%/0%; EBITDA: -4%/-2%; PAT: -3%/-2%
Recommendation Rationale
Strong Order Pipeline Maintaining Revenue Visibility: KBL reported a 5% YoY revenue increase for the quarter, with overseas business growing by a notable 39% YoY. This international growth was driven by strong contributions from SPP UK, SPP Inc (USA), and KBTL (Thailand & Singapore). While revenue in the current quarter was partially impacted by deferred orders and delays in raw material sourcing, management remains confident in regaining growth momentum. KBL continues to hold a healthy order book of Rs 3,118 Cr (up from Rs 3,094 Cr in Q3FY25), providing solid revenue visibility going forward.
Operational Efficiencies and Product Mix to Aid Profitability: For FY25, KBL posted EBITDA growth of 18% along with an improvement in EBITDA margins. This was driven by a strategic shift toward higher-value products and a significant reduction in reliance on low-margin, large-scale EPC projects, coupled with cost optimisation initiatives. KBL has been investing in technology upgrades to enhance operational efficiency and product value. Management remains focused on these initiatives and is optimistic about continued margin improvement.
Sector Outlook: Positive
Company Outlook & Guidance: The management reiterated its expectations of sustaining the growth momentum witnessed in FY25, with double-digit revenue growth likely to continue over the medium term, supported by strong demand and a healthy order book. The company delivered robust performance across most overseas markets and anticipates further improvement ahead. Additionally, the management remains optimistic about continued improvement in EBITDA margins.
Current Valuation: 25x FY27E EPS (Unchanged)
Current TP: Rs. 2,070/share; ( Earlier: Rs 2,100/share)
Recommendation: We maintain a BUY rating on the stock.
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SEBI Registration number is INZ000161633
