Kilburn Engineering FY27 recovery hinges on order conversion and H2 execution

Investment View and Valuation

ICICI Direct Research maintains a HOLD recommendation on Kilburn Engineering with a target price of Rs 400, based on 22 times FY28E EPS. The company’s FY27 performance is expected to depend on a recovery in execution and timely conversion of its enquiry pipeline into orders.

The broker expects revenue and PAT to grow at CAGRs of 8.4 per cent and 2.7 per cent, respectively, over FY26-FY28E. Key factors for potential earnings upside are timely order conversion and project execution.

Business Overview and Long-Term Growth

Kilburn Engineering provides customised drying solutions and process equipment, supported by proprietary drying-system technology. Its products serve the chemicals, petrochemicals, fertilisers, carbon black, pharmaceuticals, food, oil and gas, power including nuclear, metals and cement industries.

The company has transitioned from being a product supplier to a comprehensive solutions provider. Revenue and PAT grew at CAGRs of 38 per cent and 44 per cent, respectively, between FY23 and FY25.

Muted Q1 FY27 Performance

Q1 FY27 performance was weak, with revenue, EBITDA and PAT declining year on year. Management attributed the weakness largely to customer-led delivery deferments and longer project-approval cycles rather than a deterioration in underlying demand.

Geopolitical uncertainty has extended customer decision-making, while some projects have been delayed by one or more quarters. As a result, execution is expected to shift towards H2 FY27.

Order Inflows, Pipeline and Conversion

Q1 FY27 order inflows were Rs 134 crore, taking FY27 year-to-date inflows to about Rs 190 crore against the full-year target of Rs 800 crore. The closing order book stood at about Rs 485 crore and comprised repeat and new-sector orders, with fertiliser emerging as an important source of new business.

The enquiry pipeline was about Rs 4,000 crore across sectors and geographies. Traction was strongest in fertiliser and nuclear, while data-centre infrastructure represents an emerging opportunity. Kilburn Engineering is working with EPC players in the fertiliser and nuclear sectors to improve order conversion.

• Some drying-solution enquiries may close in Q2 or Q3 FY27.
• ME Energy has multiple steel-sector enquiries valued at Rs 10-15 crore each.
• There were no Middle East orders. Large enquiries had reached commercial negotiations before regional conflict delayed decisions.

Capacity Expansion and FY27 Guidance

Capacity expansion at Kilburn Engineering and ME Energy was at an advanced stage and was expected to be completed by the end of October 2026. Monga Strayfield is also expanding its sheet-metal fabrication capacity.

Management said these investments support the group’s medium-term annual-revenue aspiration of more than Rs 1,000 crore. It retained FY27 consolidated revenue guidance of about Rs 700 crore and an EBITDA margin expectation of 20 per cent.

FY27 is expected to be substantially H2 weighted because of deferred deliveries, projects shifted from Q1 and the existing order pipeline.

Broker Estimates

Key Risks

• Delays in order inflows could affect the company’s growth trajectory.
• Manpower unavailability could delay project execution.
• Delayed conversion of the enquiry pipeline or weaker-than-expected execution could limit the anticipated earnings recovery.