Kirloskar Ferrous Industries Ltd. - Navigating challenging times | Q1FY27 Company Update
07 Aug 2026
Companies Updates
Q1FY27 was a miss to our revenue estimates, due to lower than expected sales volumes and pricing across pig iron, tubes and alloy steel. This along with high operating expenses has led to contraction in EBITDA estimates. We expect some more price hikes in alloy steel, tubes and pig iron to add up in 2QFY27E which should life the spreads in upcoming quarter. Strong demand from tractor and CV, is expected to result in robust growth in castings. Going ahead, we expect significant EBITDA growth due to i) Full year impact of price hikes; ii) Addition of (70+25) MW green captive power in FY27E; iii) Ramp up of casting offtake along with start of 2-part foundry; iv) Margin improvement in tubes on execution of ONGC order and v) Higher production of pig iron post debottlenecking. On a longer term, projects like the steel plant in Koppal, debottlenecking and PCI/oxygen injection at Hiriyur and start of captive mines, are all factors that will structurally drive increase in profitability. We have downward revised our FY27E/ FY28E earnings by 12%/ 7% respectively to account for expected reduction in spreads vs previous estimates and lower tube sales. We ascribe 8x multiple (unchanged) and roll forward to Jun’28E consol. EBITDA, to arrive at TP of Rs 520/share (previously Rs 525/share). Remain positive on KFIL.
Kirloskar Ferrous Industries (KFIL) Ltd. Stock Price Chart
Sales volume and realizations - a mixed bag of surprises:
KFIL reported 4.3% yoy growth in consol. revenue at Rs 17.7bn, a miss to MNCL estimate. Despatches of pig iron (129kt; -3% yoy), alloy steel (22.6kt; +13% yoy) and tubes (41.5kt; -14% yoy) were lower than expected due to unfavourable market conditions. Castings (41.3kt; 18% yoy) was in-line with expectations. Realisation of pig iron and tubes missed our estimates and were lower than market pricing due to delayed price hikes and adverse product mix (for tubes); except castings where realization grew 5% yoy to Rs 1,27,464/tonne.
High operational expenses dent margins:
Partial price hikes in pig iron and castings uplifted the spreads for KFIL in Q1FY27, which was more than offset by adverse product mix of tubes and high operational expenses (power & fuel cost inflation). This resulted in 59 bps compression in margins at 12.2%, translating in an EBITDA at Rs 2.2bn; flat yoy. Adj. PAT grew 20% to Rs 1.1bn, supported by reduction in finance cost and high other income.
Looking forward to volume growth and improved spread:
1QFY27 witnessed gross margin expansion on partial price hikes, which is expected to fully reflect in KFIL’s spreads, especially for alloy steel and tubes in 2QFY27E. This will be partially offset by rise in coking coal. Further, momentum in both tractor and CV demand remains buoyant, leading to strong growth in castings. Going ahead, we expect significant growth in EBITDA due to factors like i) Full year impact of price hikes; ii) Addition of (70+25) MW green captive power in FY27E; iii) Ramp up of casting offtake along with start of 2-part foundry; iv) Margin improvement in tubes on execution of ONGC order and v) Higher production of pig iron post debottlenecking. On a longer term, projects like the steel plant in Koppal, debottlenecking and PCI/oxygen injection at Hiriyur and start of captive mines, are all factors that will structurally drive increase in profitability. We have downward revised our FY27E/ FY28E earnings by 12%/ 7% respectively to account for expected reduction in spreads vs previous estimates and lower tube sales. Remain positive on long term expansion and cost savings thesis at KFIL.
Valuation and risks:
We ascribe 8x multiple (unchanged) on Jun’28E consol. EBITDA to arrive at target price of Rs 520/share (previously Rs 525/sh). We maintain BUY rating on stock. The downward revision in TP is largely due to cut in earnings, offset by valuation roll forward. At CMP of Rs 444/share, the stock trades at 8.9x/ 7.5x FY27E/FY28E consol. EV/EBITDA. Key risks: weak commodity spreads and delay in cost saving projects.
Company website: https://www.kirloskarferrous.com/
| Rating | BUY |
|---|---|
| CMP | INR 444 |
| Target Price | INR 520 |
| Upside | 17% |
Click to download the full Kirloskar Ferrous Industries Ltd Q1FY27 Company Update
Analyst:
- Sahil Sanghvi - Research Analyst, Institutional Equities (NISM-201900004744)
- Uvais Khatri - Research Associate, Institutional Equities (NISM-202300049054)
Frequently Asked Questions (FAQ) on Kirloskar Ferrous Industries Ltd Q1FY27 Company Update
Kirloskar Ferrous Industries’ Q1FY27 results reflected near-term pressure from weaker volumes, realizations and higher operating costs. However, planned price hikes, captive power additions, casting growth and capacity expansion remain important factors for the company’s medium- to long-term outlook.
What happened in Kirloskar Ferrous Industries’ Q1FY27 results?
Consolidated revenue increased 4.3% year-on-year to Rs 17.7 billion, but missed estimates due to lower-than-expected volumes and realizations across pig iron, alloy steel and tubes.
Why did KFIL margins decline in Q1FY27?
EBITDA margin contracted to 12.2%, impacted by an adverse product mix and higher power and fuel costs. Partial price increases provided some support but did not fully offset cost pressures.
What could improve KFIL profitability?
Potential drivers include the full impact of price hikes, green captive power additions, higher casting volumes, improved tube margins from the ONGC order and increased pig iron production after debottlenecking.
What is the outlook for KFIL?
The outlook depends on commodity spreads, demand from tractor and commercial vehicle markets, execution of expansion projects and progress on cost-saving initiatives. Stronger casting demand could support volume growth.
What is the analyst target price for Kirloskar Ferrous?
The report assigns a target price of Rs 520 per share using an 8x multiple on June 2028E consolidated EBITDA. This is an analyst valuation estimate and should not be interpreted as a guaranteed price objective.
What are the key risks for KFIL?
Key risks include weaker commodity spreads, higher input costs, slower demand, delays in cost-saving projects and weaker-than-expected execution of capacity expansion plans.
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We retain "BUY" rating with a Target Price of Rs. 505 (vs Rs 525 earlier). Rashi Peripherals ltd reported decent topline growth, on the back of strong sales from the PES segment (PCs, Desktops). Our dealer checks suggest demand is improving for AI-en...
Wonderla Holidays - Chennai on Track; Expansion Visibility Low | MNCL Research Update
We reiterate our HOLD rating on Wonderla Holidays Ltd while revising our target multiple downwards to 18x (from ~20x) and rolling forward our valuation to Q2FY28E. In a seasonally weak quarter, the company delivered a better-than-expected topline, pr...
R Systems International - Strong growth tempered by higher SG&A & RSU costs | MNCL Research Update
We maintain our "BUY" and retain our target price to Rs 620. R Systems delivered higher than expected topline growth (7.9% vs our estimate of 3.5% in INR terms). EBITDA was in line with our estimates / margins dipped 70bps QoQ on the back of higher R...
SJS Enterprises Ltd - Designed to outperform | MNCL Research Update
We revise our target price on SJS Enterprises upwards to Rs1,930 to account for an increase in revenue/ margin estimates, valuation roll-forward to Sept’27E and target multiple expansion. SJS delivered another quarter of strong industry outperforma...
Goldiam International - LGD Momentum builds; ORIGEM scaling | Company Update
We reiterate our BUY rating on Goldiam International with a target price of Rs. Rs.470. Despite near-term uncertainty around U.S. tariff implications, the company has delivered an exemplary performance driven by robust topline growth and increasing w...
ASK Automotive Ltd – Meets Expectations; ALPS & Aftermarket to Drive Growth | MNCL Research Company Update
We retain ACCUMULATE on ASK Automotive while lowering our target price to Rs 525. The lowering of TP follows downward revision in our revenue and margin estimates, partially offset by valuation rollover. ASK delivered a strong Q2, broadly in line wit...
Sundram Fasteners Ltd. - Steady Domestic Momentum Offsets Export Weakness; upgrade to Accumulate - Company Update
We increase target price to Rs 1085 (previously Rs1030) and upgrade our rating to Accumulate for Sundram Fasteners Ltd. (SFL) due to steep correction in share price. Increase in TP is mainly due to valuation roll forward. SFL’s performance in 2QFY2...
Ratnamani Metals and Tubes Ltd. - Subsidiaries outperform | Company Update
We increase target price to Rs 2710 (previously 2690) and upgrade to Accumulate rating. Increase in target price is due to valuation roll forward. In 2QFY26, the core pipes business saw modest growth as strong offtake was offset by weak realizations....
