Multibagger stock: Kirloskar Oil shares down 14% in 4 sessions; should you buy?

From a high of Rs 2,720.35 apiece on June 23 to a low of Rs 2,350.15 on Tuesday, shares of Kirloskar Oil Engines Ltd (KOEL) have fallen 14 per cent in four sessions. Despite this, the multibagger stock has gained 177 per cent over the past one year, supported by a strong demand environment. Motilal Oswal Financial Services (MOFSL), which met KOEL's management, led by Vice Chairperson and Managing Director Gauri Kirloskar, said it remained positive on the overall demand environment across the company's key segments, including power generation, industrial and exports.

The brokerage said the recent large order win from one of the hyperscalers was also a positive, with execution expected to be completed during the current fiscal. It reiterated its 'Buy' rating on the stock, with a target price implying double-digit upside.

"We believe that the successful and timely completion of this order will open up opportunities from other data centre projects. Ongoing capex of the company will also enable it to capitalize on the strong demand in the powergen and industrial segments as highlighted in our previous note," MOFSL said.

The domestic brokerage said Kirloskar Oil's initiatives on new product development will yield results over time. It is baking in execution of the order and raised its FY27 and FY28 estimates by up to 10 per cent. 

"We maintain BUY with a revised target of Rs 2,750. Key risks to our estimates would come from delays in execution and lower margins going forward," it said.

The powergen segment is seen benefiting from volume and pricing-led growth in below-750kVA gensets and scale-up of demand in HHP products across user segments. MOFSL sees future order wins in HHP/Optiprime from data centers as the company is scaling up across colocation, edge and hyperscalers. 

In the industrials segment, Kirloskar Oil continued to expand its industrial business by developing application-specific engine solutions for sectors such as railways, defence, construction and mining, using its existing engine platforms and in-house engineering expertise. The management indicated that the transition to BS-V emission norms not only helped retain existing customers but also enabled the company to win new customer accounts through deeper engagement during the product validation process. 

Looking ahead, execution of the NPCIL order worth Rs 770 crore is expected to commence in FY27, MOFSL said.

In the case of exports, KOEL is building a dedicated international business by investing in local talent, distribution, service capabilities and regional partnerships to establish a sustainable global presence. 

"While exports were historically concentrated in niche applications such as mining engines in South Africa and firefighting pump engines in the Middle East, the company's strategy has shifted toward expanding its core powergen portfolio across international market," MOFSL said.