Kirloskar Brothers Stock Up By 247% In 1 Year: Reasons Behind

Have you ever imagined to see the surge of a stock in your portfolio by 247% in just one year? Well, that’s precisely what’s been happening with Kirloskar Brothers Ltd. (KBL). This leading player in the compressors and pumps industry has caught the attention of investors and market analysts alike, and for good reason.

But what exactly is fueling this meteoric rise? Should you buy, sell, or retain this stock? Just go through this article and you’ll find out soon!

(A) Reasons behind the Kirloskar Brothers Stock Rally

Here are the key factors responsible for Kirloskar Brother’s stock price rise-

(A.1) Robust Financial Results

You know, one of the biggest reasons behind the surge in Kirloskar Brothers Ltd. (KBL) stock price is their impressive financial performance. In the March quarter (Q4 of FY24), KBL reported a whopping 57% year-on-year jump in consolidated profit after tax (PAT) to Rs.142.7 crore.

That’s a huge leap!

Their revenue from operations also saw an 8.8% rise to Rs.1,223.80 crore during the same period. This robust financial health has certainly boosted investor confidence and attracted more buyers, driving up the stock price.

(A.2) Improved Profitability

Another critical factor is KBL’s improved profitability. The company’s EBITDA margins have surged to 19.15% in Q4FY24 from 14.23% in the previous year’s quarter. This improvement is thanks to a better business mix, steady commodity prices, strategic price increases, and cost-saving measures.

When a company shows it can manage its costs effectively while increasing its profit margins, it becomes more attractive to investors. And that’s exactly what’s happened with KBL.

(A.3) Growth in Key End-Markets

Guess what? KBL is riding the wave of rapid urbanization, increased industrial activity, and government support for the agriculture and infrastructure sectors. Agriculture alone accounts for nearly 50% of pump end-use demand, and with expected robust consumption growth in this area, the demand for pumps is set to rise significantly. This growth in key end-markets has fueled KBL’s demand, contributing to its stock price rally.

(A.4) Positive Industry Outlook

The future looks bright for the pump industry, which is expected to grow at an annual rate of 5-6% over 2023-26. This growth is driven by increased investment in infrastructure, the construction sector, and a growing demand for advanced pump sets. Larger players like KBL are well-positioned to benefit from these trends, enhancing their appeal to investors and driving up their stock prices.

(A.5) Outperformance Compared to Peers and Benchmark

There you go, KBL isn’t just doing well – it’s outperforming its peers and the broader market. Over the last three months, KBL’s stock surged 108%, compared to an 18% rise in the S&P BSE Sensex. This outperformance highlights KBL’s strong position in the market and makes it a standout choice for investors looking for robust returns.

(A.6) Dividend Announcement

To top it all off, KBL’s board recommended a dividend of Rs.6 per equity share for the financial year 2023-24. Dividends are a direct way of returning value to shareholders, and such announcements often lead to a positive sentiment in the stock market, driving up stock prices further.

(A.7) Positive Market Sentiment and Technical Indicators

Kirloskar Brothers’ stock has reached an all-time high and has been consistently trading above its 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. This indicates a strong and sustained uptrend. When a stock consistently trades above these moving averages, it suggests strong bullish sentiment and a solid performance trajectory, making it an attractive buy for investors.

(A.8) Strong Sector Performance

The compressors and pumps sector itself has seen a gain of 2.56%, further bolstering KBL’s stock performance. When the sector as a whole is performing well, companies within the sector benefit from the positive sentiment and increased investor interest.

(A.9) Impressive Order Book

KBL’s impressive order book is another key driver of its stock rally. In Q4 FY24, the company secured new orders worth Rs.1,282 crore, bringing its total order book to Rs.2,999 crore. This solid order pipeline provides visibility into future revenue and growth, making KBL a promising investment.

(A.10) Future Plans

Moreover, KBL plans to introduce new products in the US and UK markets and focus on increasing revenue from the service segment for its UK entity. This strategic expansion and diversification are likely to drive further growth and profitability, making the stock even more attractive to investors.

(A.11) Positive Brokerage Outlook

Domestic brokerage firm Axis Securities has projected a compound annual growth rate (CAGR) of 16% for revenue, 21% for operating profit, and 20% for PAT over FY24–26E. This optimistic outlook from a reputable brokerage adds to the positive sentiment around KBL’s stock, encouraging more investors to buy in.

(A.12) Historical Achievements and Innovation

Kirloskar Brothers’ rich history of innovation and achievement also plays a role in its strong market position. The company has been a pioneer in several areas, from developing India’s first modern iron plough to being the first manufacturer of centrifugal pumps. These milestones demonstrate KBL’s long-standing commitment to innovation and excellence, which enhances its reputation and investor confidence.

All these factors together have contributed to the significant surge in KBL’s stock price, making it an attractive investment for those looking for long-term gains.

(B) What Should You Do with Kirloskar Brothers Stocks?

Investors Sentiments in Kirloskar Brothers Stock

Here comes the prime dilemma of the investors. You may wonder what you should do in this situation… In the following sections, you will get a detailed understanding of each case- buy/sell/hold the Kirloskar Brothers stock.

(B.1) Consider Buying?

So, you’re thinking about buying Kirloskar Brothers stocks? Well, let’s break it down. You know, the stock has shown phenomenal growth over the past year, which is impressive. But remember, buying stocks at their peak can be risky. Here’s what you need to consider-

Robust Financial Performance: The company’s financial health is solid, with significant profit increases and revenue growth. This indicates a stable foundation.
Future Growth Prospects: With a strong order book and plans for international expansion, KBL has a promising future. Investing now could mean riding the wave of future growth.
Positive Industry Outlook: The pump industry is expected to grow, and KBL is well-positioned to benefit from this trend.

If you’re a long-term investor and believe in KBL’s continued growth, buying now might be a good move. However, ensure you’re comfortable with potential short-term volatility as well.

(B.2) Thinking about Selling?

Alright, so you already own KBL stocks and are contemplating selling. So, check these facts-

Current High Valuation: You see, the stock has surged by 247%. This could mean it’s at or near its peak. If you’re sitting on substantial gains, selling now could lock in those profits.
Market Sentiment: Positive market sentiment can quickly change. If you sense a shift in investor mood or industry dynamics, it might be prudent to sell before any potential downturn.
Rebalancing your Portfolio: If KBL stocks now make up a large portion of your portfolio, selling some could help you diversify and reduce risk.

Selling could be a wise choice if you want to realize your gains and possibly reinvest in other opportunities.

(B.3) Deciding to Retain?

Coming to the third case. Are you thinking of holding on to your KBL stocks? Here’s why that could be a smart decision-

Continued Growth Potential: You know, KBL’s future growth prospects are strong, with new orders, international expansion, and a positive industry outlook. Holding your stocks means you could benefit from future gains.
Dividend Income: The company has declared dividends, which means you’ll earn returns just by holding the stock. This can provide a steady income stream.
Long-Term Vision: If you believe in KBL’s long-term strategy and market position, retaining your stocks allows you to ride out short-term market fluctuations and benefit from potential long-term growth.

Holding on to your stocks could be the best move if you’re in it for the long haul and trust in KBL’s continued success.

Note: Here is another interesting fact. Apart from Jyoti CNC Automation Limited, several other companies have witnessed a stock rally too. Some of them are-

(C) Final Thoughts

In short, your decision to buy, sell, or retain Kirloskar Brothers stocks depends on your investment strategy, risk tolerance, and financial goals. If you’re looking for long-term growth and believe in KBL’s future, buying or retaining could be wise. However, if you want to lock in gains or diversify, selling might be the way to go.

Whatever you choose, make sure it aligns with your overall investment plan and financial objectives.

Thanks for giving your precious time to read this article. Feel free to share your thoughts in the comment section 🙂