Kirloskar Brothers’ Shares Zoom 10%, Operating Performance Expected to Improve

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Kirloskar Brothers Limited (KBL) has witnessed a surge of 9% in its shares on Friday’s intra-day trade on the Bombay Stock Exchange (BSE), taking the price to Rs 418.

This rise in share price is due to the strong business outlook of the company, and the stock is expected to reach its 52-week high of Rs 424, touched on November 25, 2022.

Kirloskar Brothers Limited (KBL) is the leading company of the Kirloskar Group and specialises in fluid management. KBL offers comprehensive fluid management solutions for a range of large infrastructure projects, including but not limited to water supply, power plants, irrigation, oil & gas, and marine & defence. The company designs and manufactures various pumps, valves, and hydro turbines for various industrial, agricultural, and domestic applications.

KBL has been recognised for its excellence in pump manufacturing by the American Society of Mechanical Engineers (ASME), which has awarded the company the N and NPT certification. This certification is a testament to KBL’s exceptional engineering and manufacturing capabilities, making it the only pump manufacturing company in India and the ninth in the world to receive this distinction.

In Q3FY23 (October-December quarter), KBL launched new products such as the KW series vertical pump for HVAC applications and a submersible borewell pump capable of handling sand particles and low energy consumption.

In 9MFY23 (April-December), KBL’s consolidated profit after tax (PAT) more than doubled to Rs 135.10 crore due to strong operational performance. This is compared to a PAT of Rs 39.7 crore in 9MFY22.

KBL’s revenue grew 23.9% YoY to Rs 2,606 crore in the first nine months of the current financial year 2022-23, from Rs 2,103 crore in the year-ago period. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin improved by 362 basis points (bps) to 10.3%, driven by improved product mix, operating leverage, and revenue recognition of a high-value order. KBL’s consolidated order book grew by 21% YoY to Rs 2,845 crore.

According to CRISIL Ratings, Kirloskar Brothers Limited (KBL) is expected to deliver strong operating performance in the upcoming quarters of the current fiscal year, driven by a substantial order book and healthy demand growth. The rating agency forecasts annual revenue growth of 8-10% over the medium term, with an expected improvement and sustainability of the Ebitda margin at 8-9%. The improvement in Ebitda’s margin is likely to be driven by steady progress in the performance of KBL’s international subsidiaries and cost-rationalisation initiatives. It is essential to maintain consistent improvements in operating profitability.

The KBL group’s ‘positive’ outlook is based on the expectation of sustained improvement in operating performance while maintaining an adequate financial risk profile over the medium term. The company’s well-established market position in the pumps business and a substantial order book that offers good revenue visibility and an extensive geographic reach through a strong distribution network support this outlook. CRISIL Ratings expects the company’s debt metrics to improve as its operating performance improves. Annual cash accrual is estimated to be around Rs 200 crore, with moderate yearly capital expenditure (capex) of Rs 70-80 crore over the medium term.

With improvement in the operating performance, debt metrics are expected to improve, and annual cash accrual is expected to be about Rs 200 crore against yearly moderate capital expenditure (capex) of Rs 70-80 crore over the medium term, the rating agency said in September rationale.

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