Top Conviction Ideas : Buy Kirloskar Brothers Ltd for Target Rs. 2,330 - Axis Securities Ltd
Recommendation Rationale
* Robust Order Pipeline Ensuring Revenue Visibility: KBL posted a marginal decline in revenue by 0.8% YoY in Q2FY26, impacted by seasonal factors such as a prolonged monsoon and external headwinds. Demand momentum, however, stayed firm across both the small pump and industrial segments. The consolidated order book expanded to Rs 3,564 Cr (vs Rs 3,345 Cr in Q1FY26), ensuring healthy visibility for upcoming quarters. The company’s strong order book, diversified operations, and strong execution record indicate very strong growth prospects in H2FY26 and FY27.
* Profitability Impacted by Mix and Forex, Efficiency Measures Underway: The YoY moderation in EBITDA margin was primarily driven by product mix variations and adverse forex movements. Nevertheless, KBL continues to emphasize operational efficiency and cost optimisation initiatives, which are expected to aid margin recovery in the coming quarters. Management remains confident about achieving sustainable growth backed by balanced exposure between domestic and international markets, a strong order pipeline, and continued focus on operational excellence.
* Valuation & Recommendation: We value the stock at 25x Sept’27E EPS, with a target price of Rs 2,330/share. 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. The current order book provides strong revenue visibility. Accordingly, we recommend a BUY rating on the stock
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