Multibagger Stock: Kirloskar Brothers gained 110% in less than 5 months, advanced 1100% in 5 years; should you invest?

Kirloskar Group stocks are experiencing a robust bull run in 2024, with some delivering multibagger returns. The standout performer among the group’s stocks is Kirloskar Brothers, the flagship company of the Kirloskar Group.

The company is a prominent player in the fluid management sector, specialising in pumps, valves, and related systems. KBL's solutions cater to various industries such as water supply, irrigation, power generation, and industrial processes.

Over the last 12 sessions, the stock has surged by 42%, bringing its year-to-date return to an impressive 110%.

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Notably, over the past three years, the stock has delivered multibagger returns in two. In CY21, it gained 159%, and in the previous calendar year, it achieved a return of 174%.  Over the last five years, the shares have delivered a whopping return of 1100%. 

In the previous trading session, the stock reached a new record high of ₹1,924 per share as investors responded positively to the company's Q4 and FY24 performance. 

During the March quarter, the company demonstrated strong results, supported by steady revenue growth and a decline in raw material prices, leading to year-over-year operating margin expansion.

Revenue from operations increased by 9% year-over-year to ₹1,228.8 crore in the March quarter, while full fiscal year revenue rose by 7% to ₹4,001 crore. Net profit jumped 52% year-over-year to ₹152.8 crore for the quarter and improved by 48% to ₹349.7 crore for FY24.

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The company's strategic focus on increasing the share of value-added products has significantly reduced its exposure to low-margin and lumpy EPC orders, which accounted for approximately 3% in FY24 compared to 75% in FY10.

Additionally, the company has implemented initiatives to enhance operational efficiencies and allocated resources toward debottlenecking to optimise capacity utilisation. These efforts have directly contributed to improving KBL's profitability.

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Strong revenue visibility

The company's growth momentum is expected to persist, driven by a robust order book. Additionally, KBL received dividends from its group companies, contributing to higher other income.

During the quarter, KBL secured new orders worth ₹1,282 crore, encompassing both domestic and international markets. As of Q4 FY24, the company's order book stands at a solid ₹2,999 crore.

KBL plans to leverage its localised global presence by introducing new products in the US and UK markets while focusing on increasing revenue from the service segment for its UK entity.

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Considering these factors, domestic brokerage firm Axis Securities projects a CAGR of 16% for revenue, 21% for operating profit, and 20% for PAT over FY24–26E.  

"Strong visibility from the value-added products, softening raw material costs, and operational leverage generated at the international subsidiaries will result in a YoY improvement in profitability," said the brokerage. 

The Kirloskar Group has a history of 135 years that has been filled with notable milestones. From developing the country’s first modern iron plough to being India’s first manufacturer of centrifugal pumps, the company has many "firsts" to its credit. 

Among these achievements are India's first diesel engine, electric motor, lathe, or the specialised Concrete Volute Pump (CVP), according to the company's website.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.