Kirloskar Oil Shares Slip Amid Slump; Motilal Oswal Reiterates 'Buy' Citing Data Centre and Export Breakthrough

Kirloskar Oil Shares Slip Amid Slump; Motilal Oswal Reiterates 'Buy' Citing Data Centre and Export Breakthrough​

Shares of Kirloskar Oil Engines Ltd (KOEL) continued a bearish trend on Tuesday, dipping over 2% to Rs 2,384.90. This latest slide marks a decline that approaches 14% from the stock's June 23 high of Rs 2,720.35. Despite this extended loss streak, company management and brokerage firm Motilal Oswal Financial Services (MOFSL) maintain strong confidence in KOEL’s long-term growth trajectory.

KOEL management highlighted a recent contract with a hyperscaler as a significant "breakthrough." This data centre order includes a critical long-term service agreement, which the company expects to deliver during FY27. The firm noted that successful execution is paramount given the specialised requirements of modern hyperscale customers.

Management Focuses on Data Centre and Margin Expansion​

The management team reiterated its ambitious goal of transforming KOEL into a $2 billion entity by FY30. Power generation has been identified as a core driver for this growth. The company expects the data centre business specifically to yield over 30% growth.

KOEL is actively enhancing the market share of higher-margin segments. This includes focusing on high-horsepower products, aggressively pursuing exports, and strengthening the aftermarket segment. These strategic shifts are intended to boost overall profitability across the organization.

Motilal Oswal Raises Target After Hosting KOEL Management​

Following a meeting with the company’s leadership, Motilal Oswal reiterated its 'Buy' rating on the stock. The brokerage firm increased its target price for KOEL to Rs 2,750.

MOFSL expressed positivity regarding the overall demand environment across KOEL's primary operational segments, which include power generation, industrial projects, and exports. They specifically noted that the recent hyperscaler order is a positive signal for the company’s business health.

Strategic Orders Fueling Future Growth​

Motilal Oswal highlighted several crucial future orders expected to benefit KOEL. The execution of an Rs 7.7 billion NPCIL order is anticipated to commence in FY27. Additionally, work on a Rs 2.7 billion Indian Navy Make-I category 6MW Medium Speed Marine Diesel engine order is slated for commencement from FY28-29.

The brokerage added that the successful delivery of these strategic prototypes holds the potential to unlock substantially larger opportunities within both the nuclear and defense segments for the company.

Market Outlook and Financial Projections​

Motilal Oswal’s financial projections remain robust, expecting revenue, EBITDA, and PAT to achieve a CAGR of 28%, 34%, and 38% respectively over FY26-29E. This growth is predicted through operating leverage, margin expansion, and consistent demand strength.

The company's export strategy is also being actively developed, with KOEL building a dedicated international business unit. The portfolio is set to expand across key regions including Southeast Asia, Africa, and the Middle East.

Key Risks Highlighted by Analysts​

While confidence remains high, Motilal Oswal has flagged several risks that investors should monitor. These include potential delays in project execution, increased competitive intensity within key sectors, and volatility in commodity prices.