Kirloskar Pneumatic growth outlook intact despite Middle East dispatch delays

Investment View and Valuation

In its September 18, 2026 management-meet update on Kirloskar Pneumatic Company, Prabhudas Lilladher upgraded its recommendation to BUY from Accumulate following the recent correction in the share price. The broker raised its target price to Rs 861 from Rs 855, while leaving FY27E and FY28E sales, EBITDA and EPS estimates unchanged.

The revised valuation rolls forward to September 2028E and applies a price-to-earnings multiple of 30 times, compared with 32 times on March 2028E previously. At the report CMP of Rs 694, the stock traded at 30.5 times FY27E and 26.0 times FY28E earnings.

Near-Term Execution and Order Book

The principal near-term concern is execution. Management said Q2 FY27 revenue could be affected by delayed Middle East dispatches, site delays at large air-compressor installations, the absence of a large refrigeration-package dispatch and delayed Precision Engineering Division, or PED, dispatches.

Management expects these issues to be temporary and concentrated in Q2 FY27, with pending PED dispatches providing scope for a stronger subsequent quarter and revenue remaining back-ended. However, the Middle East conflict could affect some orders planned for the year and could weigh on the company’s stated 20 per cent growth aspiration. The order-book mix is expected to remain broadly stable, with about 60 per cent from equipment and 40 per cent from package business.

Management remains selective on large package orders, targeting an 18-20 per cent margin threshold rather than pursuing lower-margin revenue. Domestic package demand is healthy, especially in oil and gas, and meaningful order inflows are expected in Q4 FY27.

Operational Priorities and PED Outlook

Vertical integration provides some protection against input-cost pressures, although selected increases may require customer pass-through. PED is expected to perform well during the year, supported by backward integration into forgings and castings, while the company seeks to reduce the share of the lower-margin gear business.

No major fresh PED capital expenditure is planned unless supported by development orders, validation, customer volume visibility and confirmed commitments.

Long-Term Growth Drivers

Longer-term growth drivers identified by Prabhudas Lilladher include continued expansion in Air Compression, Refrigeration, CNG and higher-margin complex-gas applications.

• Tezcatlipoca is addressing a Rs 500-700 crore market, with an estimated Rs 850-900 crore unaddressed opportunity.
• Kirloskar Pneumatic Company intends to extend the range into higher-capacity applications, including solar and semiconductors.
• Product development includes more efficient approximately 160 kW machines, larger compressor frames and a roughly 12,000 CFM test-cell frame expected within 12 months.
• Tonali has secured initial sales, while Hydrino was launched last year.

Refrigeration Business and New Products

In refrigeration, management estimates Kirloskar Pneumatic Company has more than 70 per cent share in ammonia reciprocating compressors, with opportunity from food processing, fish processing and coal gasification.

Zephyros, an ammonia-based water-chilling product for comfort cooling, has two units operating at company factories and its first external sale, though external commissioning is pending and commercialisation has been slower than expected. A roof-mounted version is expected to be ready for commercialisation in the following quarter.

Southeast Asia is gaining traction, including a large refrigeration order from a global fisheries player. The company has also partnered with a United States-based entity for refrigeration and air-product sales and support.

Broker Estimates

Revenue is projected to imply a FY26-FY29E CAGR of 15.9 per cent. EBITDA is forecast to rise from Rs 3,571 million in FY26 to Rs 5,427 million in FY29E, with margins broadly stable around 19-20 per cent. Adjusted PAT is projected to grow at a 14.6 per cent CAGR to Rs 3,982 million in FY29E.

Key Risks

• Persistent Middle East disruption.
• Delayed dispatches and installations.
• Slower Zephyros adoption.
• Competitive low-return CNG daughter-station opportunities.
• Potential pressure from input costs.