Kirloskar Pneumatic Company Ltd - Delivers on guidance; all eyes on order booking - Company Update

Q4FY26 was a beat to earnings estimates due to outperformance on margins (although revenue was in-line), driven by strong execution of deferred package orders and operational efficiencies . While KPCL delivered 26% margins in Q4FY26, we expect margins to revert to 18-20% in FY27, due to an equipment heavy order book. KPCL continues to focus on introducing new products like Tyche semi-hermetic compressors, scaling up sales of indigenous offerings like Tezcatlipoca & Khione and working on new patented technology like the compressor for commercial AC (Zephros C – approved under PLI scheme), which can all accelerate growth from FY28E. While demand for refrigeration remains strong, significant part of growth in FY27 will be driven by the Precision engineering division (PED). Executing such large orders in PED may not continue beyond 2years. Therefore, we remain cautious in medium term and will be watchful on the order booking in FY27. We have revised our earnings estimates by +0.8%/ -1% in FY27/ FY28E and increased multiple to account for the improved demand from process gas. However, we downward revised KPCL to HOLD rating (previous BUY) due to rich valuations.

Strong execution drives revenue recovery:

KPCL reported 20.3% YoY growth in revenue at Rs7.1bn in Q4FY26, supported by clearance of deferred orders and improved execution, particularly in refrigeration and air compression segments. For FY26, revenue stood at Rs17.9bn (+8.9% YoY). New offerings such as Tezcatlipoca and Tyche have begun contributing, with increasing substitution opportunity from European imports.

Margins expand sharply on mix and cost actions:

KPCL reported margins at 26.1%; +758bps yoy; driven by favourable product mix (higher share of packages) and operational efficiencies. This translated into a 70% yoy growth in EBITDA at Rs1.86bn for 4QFY26. Additionally, benefits from O&M contracts aided the 22% yoy growth in FY26 EBITDA with a margin of 20%. Effectively, KPCL reported 66% increase in Adj. PAT at Rs1.4bn in Q4FY26.

Execution recovery visible; product pipeline to drive medium-term growth:

The strong Q4 execution validates management’s commentary of deferred order clearance, with Rs1.8bn of private sector orders executed during the quarter. Order inflows remained strong at over Rs20bn during the year, with Q4 witnessing a healthy pickup, resulting in an order book of Rs18.6bn as of April’26 (+15% YoY). This also includes meaningful contribution from the Precision engineering division which is expected to scale to 16% of FY27 revenues. However, a meaningful portion of the backlog constitutes of equipment orders, implying a more evenly distributed execution profile in FY27. There are several new products which will help in augmenting this growth for 3years i.e.: i) Tezcatlipoca is expected to hit record order booking with new variants ii) semi-hermetic refrigeration compressor Tyche for import substitution where KPCL will have inhouse casting & motor and iii) commercial AC (Zephros C system) compressors having a huge domestic market (capex approved under PLI scheme), are expected to drive growth in FY28 and beyond. Process gas has now started showing signs of recovery due to governments push to scale up CGD and PNG pipelines. However, we remain cautious on our estimates due to insufficient order book at the start of FY27.

Valuation:

We expect KPCL’s Revenue/ EBITDA/ PAT to grow at a CAGR of 17%/ 11%/ 11% over FY26-28E. We arrive at a Target Price of Rs 1405 (Rs 1370 previously), valuing the stock at 28x (previously 27x) Mar’28E PER. Revision in TP is due to increase in multiple, attributed to the expected recovery in CGD and PNG demand. We downward revise KPCL to HOLD (previously BUY) due to rich valuations. Key Risks: supply chain headwinds and acceptance of new products.

Company website: hhttps://www.kirloskarpneumatic.com/

*CMP is as per report published date

Click to download the full Kirloskar Pneumatic Company Ltd. Q4FY26 Company Update

Analyst:

• Sahil Sanghvi - Research Analyst, Institutional Equities (NISM-201900004744)
• Uvais Khatri - Research Associate, Institutional Equities (NISM-202300049054)

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FAQs on Kirloskar Pneumatic Company Ltd. Q3FY26 Company Update

What drove KPCL’s strong Q4FY26 performance?

Strong execution of deferred orders, favorable product mix, and operational efficiencies led to significant margin expansion.

What is the outlook for margins?

Margins are expected to normalize to 18–20% in FY27 due to a higher share of equipment-based orders.

What are the key growth drivers?

New product launches, process gas demand recovery, and scaling of the precision engineering division will drive growth.

What risks should investors track?

Key risks include weak order inflows, supply chain disruptions, and slower adoption of new product offerings.

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