Non-gas growth in sight despite macro challenges
We interacted with the management of Kirloskar Pneumatic Company (KKPC) and discussed the prevailing macro environment, financial outlook, and progress across new product platforms. The management highlighted that both public and private capex remains subdued, resulting in delays in order finalizations and dispatches. Despite this, the company is confident of delivering double-digit revenue growth with stable margins in FY26, supported by resilient consumption-led demand. The Tezcatlipoca platform continues to scale well, with 115 units sold to date, and is expected to capture 75-80% market share, while strong momentum in Tyche positions the company to achieve ~200 unit sales in FY26. KKPC’s entry into the Rs50bn commercial refrigeration market through Zephyros, is expected to become a meaningful growth driver, potentially contributing peak annual revenue of ~Rs10bn starting FY27. Meanwhile, Gas Compression continues to face headwinds due to the absence of large project awards and muted orders. The stock is trading at PE of 23.5x/19.5x on FY27/28E earnings. We maintain our ‘BUY’ rating valuing the stock at PE of 33x Sep’27E (same as earlier) arriving at TP of Rs1,620 (same as earlier).
Project executions and order finalizations remain key monitorables in the short term. Despite the macro challenges, we believe KKPC is well placed for healthy long-term growth driven by 1) product launches in Air Compression (Tezcatlipoca, ARiA) to capture centrifugal and low-end screw compressor markets that are import-dominated; 2) new products – Calana and Jarilo – launched to address opportunities in CNG daughter stations and CBG plants, respectively; 3) launch of Tyche and Khione, and acquisition of S&C India to enhance penetration in commercial and industrial refrigeration; 4) focus on building in-house IP and backward integration capabilities; and 5) strong cash flows and balance sheet.
