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Revenue Visibility Remains Strong; Maintain BUY

Est. vs. Actual for Q1FY26: Revenue: MISS; EBITDA: MISS; PAT: MISS

Changes in Estimates post Q1FY26

FY26E/FY27E: Revenue: -0.1%/0%; EBITDA: -0.1%/0%; PAT: -0.2%/0%

Recommendation Rationale

• Strong Order Pipeline Maintaining Revenue Visibility: KBL reported a 5% YoY revenue degrowth for the quarter, with overseas business growing by a notable 43% YoY. This international growth was mainly driven by strong performance at SPP UK, while the US and Thailand businesses were impacted by order deferrals. Domestic revenues were impacted by a temporary slowdown in small pumps due to the early onset of monsoon. KBL continues to hold a healthy order book of Rs 3,345 Cr (up from Rs 3,118 Cr in Q4FY25), providing clear revenue visibility going forward.

• Operational Efficiencies and Product Mix to Aid Profitability: While the EBIDTA margins declined sequentially due to seasonality, the company witnessed improvement in EBITDA margins on a YoY bais (11.4% vs 10.8%). This was driven by decline in raw material prices, coupled with cost optimisation initiatives. KBL continues to take efforts for improving operational efficiencies initiatives and remains optimistic about continued margin improvement.

Sector Outlook: Positive

Company Outlook & Guidance: The management mentioned that the slowdown in domestic business is a seasonal phenomenon and the demand trends in key end markets remain strong. In the US, the orders which were deferred due to elections are expected to contribute to growth in the second quarter, and overall international demand trends remain positive, as seen in the 9% order book growth during the quarter. The cost optimization initiatives and volume growth are expected to lead to enhanced productivity and better absorption of fixed costs.

Current Valuation: 25x Sep’27E EPS (Unchanged)

Current TP: Rs. 2,330/share (Unchanged)

Recommendation: We maintain a BUY rating on the stock

Financial Performance: KBL’s Q1FY26 performance was weaker than our expectations. It reported revenue of Rs 979 Cr for Q1FY26, registering a 5% YoY and 24% QoQ degrowth, falling short of our estimate by 20%. EBITDA stood at Rs 112 Cr, flat YoY and down 41% QoQ, missing our estimate of Rs 137 Cr. EBITDA margin came in at 11.4%, up 57 bps YoY but down 338 bps QoQ due to seasonality. PAT stood at Rs 67 Cr, rising 2% YoY and declining 51% QoQ, also missing our estimate of Rs 82 Cr.

Outlook: With sustained demand from key end markets and a robust order book, KBL remains on track to achieve double-digit revenue growth in the medium term. Some of the orders that were deferred or delayed during Q1FY26 are expected to contribute to growth going forward. The current order book provides strong revenue visibility, with the execution cycle ranging from a few weeks to as much as 18 months. Order intake is also expected to remain strong. Additionally, the focus on cost optimisation and an improved product mix should support continued margin expansion.

Valuation & Recommendation We value the stock at 25x Sep’27E EPS, with a target price of Rs 2,330/share. This implies a 25% upside from the CMP, and we maintain our BUY rating on the stock.

Key Concall Highlights

• Financial Performance: Q1FY25 revenue decreased by 5% YoY, as the petformance was impacted by seasonal trends and geopolitical factors. Early onset of monsoon demand in small pump segment which primarily serves the agriculture sector. Elections in the US and Thailand lead to temporary slowdown. EDBITA margins improved YoY due to softer input prices and cost optimization initiatives.

• Sector Highlights: Revenue from Small Pumps stood at 24% of total quarterly sales from new products including mini, monobloc, submersible borewell, and dewatering pumps. In the Water & Irrigation segment, the company secured orders for over 110 vertical turbines pumps, more than 200 split case pumps. The Power segment posted a solid 375% YoY revenue growth, while the Building & Construction segment recorded a 7% increase. The order book for the Industry and Marine & Defence segments grew by 6% and 127% YoY, respectively. Company backed orders of 8 Nos. ballast pump sets for Marine & Defence segment. Vales sales increased by 24% YoY.

• Order Intake: KBL received orders worth Rs 1,336 Cr during the quarter, up 9% YoY. Approximately 70% of the orders were from the domestic market. The overall order book stood at Rs 3,345 Cr (vs. Rs 3,118 Cr in Q4FY25 and Rs 3,053 Cr in Q1FY25). Management expects continued growth in key segments such as Power, Building & Construction, and Industrials.

• Domestic Performance: The standalone domestic business degrew by 7% YoY in the quarter. Domestic performance was impacted due to lower demand in small pumps from agriculture sector due to early monsoon. Strong demand observed in the Industrial segment. Despite the softness, KBL reported YoY improvement in margins. The order inflow stood at Rs 932 Cr, with the domestic order book at Rs 1,929 Cr (vs. Rs 1,804 Cr in Q4FY25). Management noted that the domestic order inflow remains healthy.

• International Business: The International Business grew by 43% YoY, supported by strong execution in SPP UK. Thailand and US businesses were impacted by deferement of procurement decisions owing to elections. Some of these orders are expected to contribute to revenue in the second quarter. The management sees this as a short term disruption, observing that the underlying demand remains strong and expects momentum to improve in the coming quarters. Overseas order intake stood at Rs 404 Cr, with a pending order book of Rs 1,268 Cr. The company remains optimistic about overseas growth.

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