Kirloskar Oil Engines Shares Surge Over 8% as Jefferies Sees Potential for 26% Upside Following Data Centre Foray

Kirloskar Oil Engines Shares Surge Over 8% as Jefferies Sees Potential for 26% Upside Following Data Centre Foray​

Kirloskar Oil Engines shares witnessed a significant rally in intra-day trading on Monday, climbing by over 8 percent. The stock soared to an intra-day high of Rs 2,410 per share on the NSE, following positive coverage from global brokerage Jefferies. This move comes as analysts highlight the company's strong market positioning and expansion into crucial high-growth sectors.

The initial surge saw the stock open 2.83 percent higher. However, profit booking activity slightly moderated the upward momentum by around noon, with the stock trading at Rs 2,333.20 per share, marking a gain of 4.59 percent at that time.

Jefferies Rating Drives Investor Interest and Targets Upside​

Jefferies initiated coverage on Kirloskar Oil Engines with a 'Buy' rating. The brokerage set a target price of Rs 2,815 for the stock. This valuation implies an upside potential exceeding 26 percent from Friday's closing levels.

The report highlights that Kirloskar Oil Engines is recognized as the second-largest player in the power back-up diesel generator market. Crucially, the company is actively moving up the value chain by increasing its share within the higher-margin high horsepower segment.

Market Outlook and Profitability Growth Projections​

Jefferies projects substantial future growth for Kirloskar Oil Engines. The brokerage expects the company to achieve a 22 percent earnings per share compound annual growth rate spanning FY26 through FY30. They also project that the return on equity will improve to over 20 percent, up from approximately 18 percent.

This anticipated improvement is supported by expected margin expansion and effective capital allocation strategies within the organization. The stock has been valued at a 45 times estimated FY28 price-to-earnings multiple by the analysts.

Data Centre Expansion Promises Further Catalyst​

The company's strategic foray into the data centre segment is identified by Jefferies as a source of significant future upside. This development adds new layers of positive sentiment to investor confidence in Kirloskar Oil Engines.

Earlier this year, the company had already received a rating upgrade from JM Financial and announced a major order. In an exchange filing, Kirloskar Oil Engines confirmed securing a contract for 192 MW of power generation capacity from digital infrastructure firm HyperNext.

This new contract comprises 96 units of its 2,500 kVA Optiprime Dual Core power systems. The company stated that this contract represents one of the largest deployments of high-capacity power systems for hyperscale data centres in India.