Buy Kirloskar Group Small-Cap Stock, Soars Up 484.95% In 3-Years

A prominent stock broking firm, Monarch Networth Capital Limited has placed a buy call on a subsidiary of Kirloskar Group company stock with a target price of Rs 800 per share. Kirloskar Pneumatic is a small-cap company founded in 1962. It is India's fourth-largest air compressor player and a market leader in CNG compression packages and reciprocating compressors.

Monarch Networth believes that the company is well-poised to deliver significant value and rise above competition:

- A discernible inflection in growth trajectory both in the domestic and export markets, including, but not limited to, new product lines.
- OPM slated to leapfrog further with major business and structural changes planned.
- An all-around robust balance sheet fortified by its debt-free status, good return ratios, high asset turnover, and enviable free cash flow generation - all feathers in the cap for a capital goods company.

Kirloskar Pneumatic is a leading manufacturer of pneumatic products in India and exports its products to over 50 countries. Kirloskar is a well-established company with a strong track record of growth. The company is expected to continue to grow in the future, driven by the increasing demand for pneumatic products in India and other emerging markets.

The stock broking firm feels that the company would clock 22%, 34%, and 35% CAGR over FY23-26E in revenue, EBITDA, and PAT respectively based on the:
1) Over 40-50% market share in Rs 11.5 billion/yearly opportunity in the CNG gas compression segment,
2) Gaining market share in the rotary screw compressor segment which is a Rs.35 bn opportunity,
3) Doubling of order book over the last 5 years to Rs 11.5 billion
4) Government's infrastructure push, and
5) Focus on developing new products, on-time delivery, and push for efficiency.

Valuation

"At current levels, the stock trades at c.18x FY25E PER. We arrive at a conservative target price of Rs 800, valuing the stock at 25x FY25E (10-year PER average is c.25x), a 33% discount to a key competitor Elgi Equipments. There is a distinct possibility of further re-rating with accelerating growth and strengthening market position. The stock is very thinly researched in the street", Monarch Networth added.

Dividend Details

For the financial year 2022-23, the board of directors of the company recommended a final dividend of 150% (Rs 3 per equity share). The dividend is subject to approval by the members at the annual general meeting, which will be held on Thursday, July 20, 2023. No details of the record date or book closure were disclosed by the company yet.

Kirloskar Pneumatic Stock Price Movement

The latest stock price of Kirloskar Pnuematic has rallied 1.30% to Rs 641.40 per share on an intraday basis. In the last one year, the share price has surged by 51.61% while over three years, it has massively grown by 484.95%.

Disclaimer

The stock has been picked up from the brokerage report of Monarch Networth. Greynium Information Technologies, the author or the brokerage firm will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.