Top Conviction Ideas : Buy Kirloskar Brothers Ltd For Target Rs. 2,330 by Axis Securities Ltd
* 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 the 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 basis (11.4% vs 10.8%), driven by a decline in raw material prices, coupled with cost optimisation initiatives. KBL continues to take efforts to improve operational efficiencies and initiatives, and remains optimistic about continued margin improvement.
* Valuation & Recommendation: We value the stock at 25x Sep’27E EPS, with a target price of Rs 2,330/share. We expect the company to register a strong growth in the coming quarters, supported by a recovery in the international markets and potentially benefiting from proposed GST reforms in the domestic market. Accordingly, we recommend a BUY rating on the stock.
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SEBI Registration number is INZ000161633
