Kirloskar Pneumatic Company (KKPC IN) – Management Meet Update – New products and segment fueling growth – BUY

We interacted with the management of Kirloskar Pneumatic Company (KKPC), which outlined a steady growth trajectory, with FY26 revenue guided at ~Rs18bn and FY27 at Rs21bn while maintaining EBIT margins at ~20% despite macro uncertainties. Growth is expected to be driven by air compressors and the newly introduced Precision Engineering segment, which is likely to contribute ~18% of revenue in FY27 (~Rs4bn), supported by strong order inflows, short execution cycles (10-12 weeks) and efficient asset utilization without incremental capex. Air compressors remain the core growth engine, led by scaling of indigenously developed Tezcatlipoca, capacity ramp-up and new product launches (including a low range of 800CFM centrifugal compressor targeting dry screw replacement). The Refrigerant segment is expected to moderate in FY27 (~7-8% YoY revenue growth) due to the absence of large project orders, though the Zephyros presents a long-term structural opportunity (addressable market of Rs50bn) with strong efficiency and cost advantages. The gas compression segment continues to face structural headwinds with limited near-term recovery visibility, prompting the company to reduce dependence and focus on selective opportunities. Overall, KPCL is transitioning towards a more diversified and resilient business mix (~80-82% from compressors and 18% from precision engineering), reducing reliance on lumpy gas and project-based revenues, with growth increasingly anchored by product-led segments and new verticals. The stock is currently trading at a PE of 24.1x/19.6x on FY27/28E. We maintain our ‘BUY’ rating valuing the stock at PE of 32x Sep’27E (same as earlier) arriving at TP of Rs1,556.