Kirloskar Brothers soars 10%; nears 52-week high on strong business outlook

Shares of Kirloskar Brothers (KBL) soared 10 per cent to Rs 421.95 on the BSE in Friday’s intra-day trade owing to strong business outlook. The stock is seen inching towards its 52-week high of Rs 424 touched on November 25, 2022.

KBL is the flagship company of the Kirloskar Group. As the market leader in fluid management, KBL provides complete fluid management solutions for large infrastructure projects in the areas of water supply, power plants, irrigation, oil & gas and marine & defence. KBL engineers and manufactures industrial, agriculture & domestic pumps, valves and hydro turbines. KBL is the only pump manufacturing company in India and ninth in the world to be accredited with the N and NPT certification by the American Society of Mechanical Engineers (ASME).

In October-December quarter (Q3FY23), the company launched new product KW series vertical pump for HVAC application, submersible borewell pump capable to handle sand particles with low energy consumption.

For the first nine months (April-December) of the current financial year 2022-23 (9MFY23), KBL’s consolidated profit after tax (PAT) more-than-doubled to Rs 135.10 crore, on back of strong operational performance. It had posted PAT of Rs 39.7 crore in 9MFY22. Revenue grew 23.9 per cent year-on-year (YoY) to Rs 2,606 crore from Rs 2,103 crore in a year ago period.

Earnings before interest, taxes, depreciation, and amortization (ebtida) margin improved 362 bps to 10.3 per cent driven by improved product mix, operating leverage and revenue recognition of a high value order. The company’s consolidated orderbook grew by 21 per cent YoY to Rs 2,845 crore.

CRISIL Ratings estimates healthy operating performance in the subsequent quarters this fiscal, with sizeable order book and healthy demand growth resulting in annual revenue growth of 8-10 per cent over the medium term. The Ebitda margin is expected to improve and sustain at 8-9 per cent over the medium term, driven by steady improvement in the performance of international subsidiaries and cost-rationalisation initiatives. Sustained improvement in operating profitability remains a key monitorable.

The ‘positive’ outlook reflects the expectation of continued improvement in the operating performance of the KBL group, while sustaining its adequate financial risk profile, over the medium term. This is supported by the group’s established market position in the pumps business, sizeable order book which provides good revenue visibility, and wide geographic reach through a strong distribution network. With improvement in the operating performance, debt metrics are expected to improve, and annual cash accrual is expected about Rs 200 crore against moderate annual capital expenditure (capex) of Rs 70-80 crore over the medium term, the rating agency said in September rationale.