Kirloskar Pneumatic - Slow start to the new fiscal | Company Update

Kirloskar Pneumatic’s (KPCL) Q1FY27 missed our estimates due to slower than expected execution of orders, driven by delay in order finalization and Middle East crisis. These projects are expected to be completed in 2QFY27E, which along with a healthy order backlog, is likely to result in gradual pickup in revenues. Margins improved on YoY basis due to benefits on low RM cost, localization of components and favourable product mix. KPCL continues to focus on introducing new products like Tezcatlipoca A800, Tonalli Biogas system and Tyche semi-hermetic compressor, and is 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 robust, with strong order booking for Khoine compressors, significant part of growth in FY27E will be driven by the Precision engineering division (PED). We have kept our earnings unchanged but increased multiple to account for the improved demand from process gas and new products. However, we downward revised KPCL to Accumulate rating (previous BUY) due to rich valuations.

Kirloskar Pneumatic Ltd. Stock Price Chart

Slow execution to start the new fiscal:

KPCL reported 8% YoY growth in revenue at Rs 3bn in Q1FY27, miss to our expectation of Rs 3.7bn, due to lower than expected revenue from the Precision engineering division (PE) and weak growth in the compressor business.

Margins expand sharply on favourable product mix:

KPCL reported margins at 15%; +320bps YoY; driven by favourable product mix, low RM cost and increased in house manufacturing of components. This translated into a 37% YoY growth in EBITDA at Rs 456mn for 1QFY27. With some drag from higher depreciation, KPCL reported 26% YoY increase in Adj. PAT at Rs 334mn.

Expect gradual pickup in execution; new products to drive medium-term growth:

1QFY27 was a quarter of slow order execution and weak order booking, impacted by delay in project finalization and the Middle East tensions. The positive takeaway is continued order booking momentum for Khione & Tezcatlipoca compressors. Order book remains stable at Rs 18.5bn as of July’26 (+7% YoY). This also includes meaningful contribution from the Precision engineering division which is expected to contribute 15% of FY27E revenues. However, a meaningful portion of the order backlog constitutes of equipment orders, implying a likely pickup in deliveries from 2QFY27E. There are several new products which will help augment this growth over three years i.e.: i) Tezcatlipoca is expected to hit record order booking with new variant A800 ii) semi-hermetic refrigeration compressor Tyche for import substitution where KPCL will have inhouse casting & motor iii) Tonalli for Biogas system and iv) commercial AC (Zephros C system) compressors having a huge domestic market (capex approved under PLI scheme). Additionally, Process gas has now started showing signs of recovery due to government’s push to scale up CGD and PNG pipelines. Remain positive on KPCL.

Valuation:

We expect KPCL’s Revenue/ EBITDA/ PAT to grow at a CAGR of 17%/ 11%/ 11% over FY26-28E. We arrive at a TP of Rs 1,725 (Rs 1,370 previously), valuing the stock at 33x Jun’28E PER (previously 27x Mar’28E PER). Revision in TP is due to increase in multiple, attributed to the expected recovery in CGD, new product led growth and valuation roll forward. We downward revise KPCL to Accumulate (previously BUY) due to steep rally in share price (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. Q1FY27 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. Q1FY27 Company Update

1. Why did Kirloskar Pneumatic's Q1FY27 results miss expectations?

Revenue growth was affected by delayed project finalization, slower execution in the Precision Engineering division and disruptions linked to geopolitical tensions in the Middle East.

2. What supported the company's margin expansion?

Operating margins improved due to lower raw material costs, increased localization of components, favourable product mix and higher in-house manufacturing.

3. What are the key long-term growth drivers for Kirloskar Pneumatic?

Growth is expected to be driven by new compressor platforms, refrigeration products, process gas recovery, precision engineering projects, biogas solutions and commercialization of PLI-supported technologies.

4. How strong is Kirloskar Pneumatic's order book?

The company reported an order backlog of approximately ₹18.5 billion, providing healthy revenue visibility with execution expected to improve over the coming quarters.

5. Why does the institutional research maintain an Accumulate rating?

The research remains constructive on the company's long-term fundamentals, product pipeline and order visibility, while acknowledging that the recent share price rally has limited near-term valuation upside.

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