Kirloskar Oil Engines (KOEL), a leading manufacturer of diesel engines and diesel generator sets, has become one of the biggest wealth creators for investors in the last year.
During the last one-year period, the stock climbed from around ₹154.55 apiece to the current position of ₹398.10, producing a staggering return of 157.58%.
The company's shares have witnessed a phenomenal rise of 221% from their 52-week low of ₹124 apiece.
Taking the current trading price into account, the stock is just 12% away from reaching its all-time high of ₹454 which it attained in December 2017.
In the recent March, the Kulkarni family, a part of the promoter group of Kirloskar Oil Engines, sold an 18% stake in the company for ₹825 crore through block deals. However, despite this large sale, the stock price remained unaffected due to the strong demand from institutional investors.
KOEL has been dominating the power generator market for the last three decades. It offers the widest range of petrol and diesel power generating sets (2-1010 kVA) used for power back-up in industrial, residential & commercial establishments and also in special applications such as telecom.
In December last year, the company signed a memorandum of understanding with RITES Ltd., a renowned transport infrastructure consultancy and engineering company. The two firms aim to collaborate and explore business opportunities in the areas of railway rolling stock, infrastructure, and urban transport for both domestic and overseas markets.
KOEL plans to utilize its R&D capabilities, manufacturing expertise, and supply chain network to manufacture and supply products for RITES' customers, while RITES will provide design, marketing, operation, maintenance, and any other necessary support for exploring business opportunities.
The government’s increasing focus on infrastructure availability, affordable housing, thrust on rural electrification, 100% electrification of the railway network by 2025, and expanding metro rail to 25 cities by 2025 is expected to propel the growth of capital goods companies, said domestic brokerage firm Ashika Stock Broking.
The government has envisaged capital expenditure to the tune of ₹111 lakh crore in the infrastructure sector between FY20 and FY25, which provides ample scope of growth for companies related to infrastructure development like Kirloskar Oil Engines, it said.
The government's continued focus on investing in infrastructure is anticipated to enhance the demand for backup power gensets across various sectors such as railways, metros, roads, data centers, healthcare, and real estate.
It is anticipated that in the future, approximately 85-90% of generator sets will serve as backup power, which is favorable for Kirloskar Oil Engines.
Consequently, the next phase of growth for diesel generator sets will result from the rise in government expenditure on infrastructure and industrial capital expenditure, the brokerage noted.
Further, the rollout of 5G in the Asia Pacific regions will boost the demand for telecom power generators, which in turn bodes well for the company.
Meanwhile, the company has recently launched its I-Green gensets in the low and medium KVA ranges, along with its first to offer loT-enabled genset, and has gained market share in High Horse Power (HHP) genset, the brokerage stated.
The I-Greenrange remains the market leader with significant improvements in IoT activations and is getting an encouraging response from customers, it highlighted.
On the fundamental front, the company delivered an impressive performance in Q3FY23, with its net profit rising 202% YoY to ₹88 crore. The operating profit during the quarter came in at ₹192 crore, an increase of 118% YoY, while the operating profit margin expanded 200 basis points in Q3FY23.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.