Gensets and Engines, Heavy Electrical Equipment, Trending in the Economy

Kirloskar Oil Engines Ltd – 2X Revenue in 3 Years?

Kirloskar Oil Engines, India's largest Agriculture engines and pump set manufacture.

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(A) About

Kirloskar Oil Engines - Logo

Kirloskar Oil Engines was incorporated in June 1978 is engaged in manufacturing of diesel engines. It is a part of Kirloskar Group of companies.
That has business interest in various sectors such as manufacturing, oil& gas, power, construction and mining, agriculture, industry and transport.
Moreover, it is India's largest Industrial Engine manufacturer with over 40,000 engines manufactured annually. And also India's largest diesel Agri engines and pump set manufacturer with over 1,45,000 units manufactured annually.

(B) Journey

(C) Shareholding Pattern

Kirloskar Oil Engines - Shareholding Pattern

Promoters holding decrease from 59.43% to 41.35% due to the exit of one of Promoter family (Kulkarni family) as they want to persue independent ambitions and intrests.

(D) Board of Directors

(E) Business Segment

Kirloskar Oil Engines - Business Segment

Engines & Gensets, Industrial engines, Farm Equipment's and Tractor Spares are sold to B2B Customers, while Engines Pump sets, Electric Pumps are sold to B2C Customers.

(i) Engines

Kirloskar Oil is the market leader in India's low and medium HP genset segments. Further, its products are sold under KOEL 'Chhota Chilli' and KOEL 'i-Green' brands.

Moreover, the Company specializes in manufacturing air-cooled and liquid-cooled diesel engines and generating sets ranging from 2 kVA to 5200 kVA for industrial, residential, and commercial establishments, and special applications like telecom. And also manufactures a wide range of industrial engines ranging from 20 hp to 750 hp.

(ii) Electric Pumps & Others

Electric Pumps & Other farm equipment's comes under Water Management Solutions (WMS) and Farm Mechanization Solutions (FMS). WMS produces diesel and electric pumps, while FMS manufactures power tillers, power weeders, and rotary tillers.

(iii) Financial Services

Kirloskar Oil owns a fully-fledged non-banking financial company (NBFC) called Arka Fincap Limited, in which it plans to invest INR 1,000 crores. The focus of this segment is to provide structured term financing solutions to corporates and real estate companies, as well as offer loans to micro, small, and medium enterprise (MSME) borrowers.

(F) Revenue Segment

(G) Cost Structure of Kirloskar Oil Engines

Kirloskar Oil Engines - Cost Structure

(H) Financials

Kirloskar Oil Engines - Financial Trend

Company has grown its revenue at 7.25% in past 7 years, while PAT grew at a CAGR of 0.51%. Company's operating and Profit margins decrease due to wide fluctuation in raw material prices. Therefore, Its PAT also impacted. However as per TTM Records, PAT margins shown improvement to 14%.

Moreover, company has a current debt/equity ratio of 0.9.

Kirloskar Oil Engines - Du Pont Analysis

Asset to Equity increase from 1.4 to 2.4 while and Sales to total assets increase from 1.3 to 0.8.

Currently company operates at 60% utilization and also aims to increase its revenue by 2 times, which will improve its Sales/Total Assets and Assets to Equity.

(I) Management Discussion & Concall

Growth Triggers

- Company sees good traction in the telecom segment.

- The company has also launched Gas Gensets in Q2 generating interest in market.

- Moreover, company has launched rental variants of gensets, which sees good traction in the market.

- Meanwhile, company has signed a MoU with RITES for joint engagement in the promotion of our products.

- Further, CPCB IV+ Emission Norms to be commissioned in the starting of July, 2023 in which ministry of environment, forest and climate change has made it mandatory for power genset assembled, manufactured and imported to India.

Acquisitions

Company has taken acquisition of controlling stake in LGMPL which has also provided the company to get its footprints in the electric pump market.

Concall Highlights Q3FY23

- During the quarter company's export sales grew by 35% YoY.

- Meanwhile, CPCB4+ will be kicking in from July this year. In which approximately 38% of the business has exposure to CPCB4+.

- Pump business remain flat due to extended rain and GST change.

- Further, company is currently running at 60% odd of capacity.

- Moreover, company is working on 2X 3Y strategy where it aims to Double its revenue in 3 years.

(J) SWOT Analysis

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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