Q3 FY25 Results Equity Research Report: Kirloskar Oil Engines Ltd. (NSE: KIRLOSENG)

Investment Summary: Kirloskar Oil Engines Ltd. is a key player in the manufacturing of engines, power generation, and related equipment. With a market capitalization of ₹10,586 Cr and consistent profit growth, the company has demonstrated strong financials. The stock is currently trading at ₹729 with a P/E ratio of 22.4, reflecting its market valuation. This Q3 FY25 Results report analyzes its financials, future projections, and potential returns over the next 5, 10, and 15 years.

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Financial Performance & Key Metrics:

• Sales: ₹6,254 Cr.
• Profit After Tax: ₹473 Cr.
• Sales Growth (3Yrs): 21.4%
• Profit Variation (3Yrs): 31.9%
• Sales Growth (Annual): 11.2%
• Operating Profit Margin: 18.8%
• ROE: 17.7%
• ROCE: 15.0%
• Debt: ₹5,430 Cr.
• Reserves: ₹2,885 Cr.
• Dividend Yield: 0.82%

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Future Projections:

5-Year Projection (2029):

Assuming a conservative CAGR of 12% in sales and 18% profit growth, the key figures are projected as follows:

• Sales: ₹11,000 Cr.
• Profit After Tax: ₹1,080 Cr.
• Stock Price Estimate: ~₹1,400 (based on PE ratio stability)
• Market Cap Estimate: ~₹20,000 Cr.
• Expected Returns: ~14-16% CAGR

10-Year Projection (2034):

With continued growth at similar rates:

• Sales: ₹17,000 Cr.
• Profit After Tax: ₹2,300 Cr.
• Stock Price Estimate: ~₹2,800
• Market Cap Estimate: ~₹35,000 Cr.
• Expected Returns: ~15-18% CAGR

15-Year Projection (2039):

• Sales: ₹26,000 Cr.
• Profit After Tax: ₹4,500 Cr.
• Stock Price Estimate: ~₹5,600
• Market Cap Estimate: ~₹60,000 Cr.
• Expected Returns: ~16-20% CAGR

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Investment Risks & Challenges:

1. Debt Management: High debt of ₹5,430 Cr can affect future expansion and financial flexibility.
2. Market Cyclicality: The capital goods sector is sensitive to economic cycles, impacting demand.
3. Global Economic Factors: Export-driven revenue can be affected by geopolitical risks and global inflation.
4. Competition: Increasing competition in engine and power solutions can put pressure on margins.

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Conclusion:

Kirloskar Oil Engines Ltd. is a fundamentally strong company with robust sales growth and profitability. Given its historical performance and industry position, long-term investors can expect an annualized return of 14-20% over 5-15 years. The stock remains attractive for investors seeking steady growth in the industrial sector with moderate risk.

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