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    Kirl. Brothers

    KIRLOSBROSGood
    Capital Goods·13 Feb 2025
    Management Summary

    Kirloskar Brothers reported a strong Q3 FY25, primarily fueled by exceptional growth in its international operations which offset a sluggish domestic performance. The company achieved significant expansion in EBITDA margins, reflecting successful operational efficiency initiatives. While the domestic revenue growth was muted, management pointed to a healthy order book and reiterated its full-year double-digit growth guidance for the standalone business. The international segment, particularly in the UK and US, continues to see strong traction in data centers, green steel, and oil & gas sectors.

    Highlights

    8

    • Consolidated revenue grew 18.6% YoY to ₹1,144 crores, driven by strong international performance.

    • Consolidated EBITDA increased 32.3% YoY to ₹183 crores.

    • EBITDA margin expanded by 170 bps YoY to 16.0%, attributed to operational efficiencies.

    • Consolidated PAT surged 43.9% YoY to ₹119 crores.

    • International business revenue grew by a robust 46% YoY during the quarter.

    • Standalone domestic business revenue saw muted growth of 3% YoY, with revenue at ₹661 crores.

    • Standalone pending order book stood at ₹1,874 crores as of December 2024.

    • Overseas pending order book was strong at ₹1,127 crores.

    Key financials

    Single quarter

    06 metrics
    1. 01Consolidated Revenue₹1,144 Cr+18.6%YoY
    2. 02Consolidated EBITDA₹183 Cr+32.3%YoY
    3. 03Consolidated EBITDA Margin16%
    4. 04Consolidated PAT₹119 Cr+43.9%YoY
    5. 05Standalone Order Book₹1,874 Cr

    Segment breakdown

    International Business
    46% Revenue Growth
    Standalone Domestic Business
    ₹661 Cr Revenue3% Revenue Growth
    List

    Guidance & targets

    2
    CategoryTargetPriority
    Capex
    Annual Capex
    around ₹100 crores
    		Medium
    Margin
    EBITDA Margins
    Continued expansion
    		Low

    Risks & concerns

    3
    RiskSeverity

    Slowdown in domestic business execution

    Standalone revenue grew only 3% YoY. Management urged a full-year perspective, citing a strong order book. — Analyst downplayed

    medium

    Supply chain constraints for large engines in international projects

    Management noted that only 2-3 global suppliers exist for very large engines, which could lead to execution volatility in large oil & gas projects. — Management acknowledged

    medium

    Quarter-to-quarter volatility in performance

    Management repeatedly cautioned analysts against looking at performance on a quarterly basis due to the nature of their made-to-order and engineered-to-order business. — Management acknowledged

    low

    Q&A highlights

    3

    “As far as the domestic market is concerned, I've always said don't look at us quarter to quarter because we are made to stock, made to order, and engineered to order. So it is going to go up and down quarter to quarter. Like I said earlier in my speech, we are still committed to double digit revenue growth.”

    Addresses the key concern of weak 3% domestic growth, with management deflecting from the quarterly number and pointing towards full-year guidance and order book strength.

    asked by Pratik Kothari

    2 min read5 chapters

    Detailed Narrative

    01

    International Business Delivers Exceptional Growth

    The international business was the standout performer in Q3, recording a 46% YoY revenue growth. This was driven by strong execution in the UK and Dutch entities, as well as good traction in the US market. Key growth sectors included data centers, fire and HVAC packages, green steel, and a pickup in oil & gas exploration in the Middle East. Management highlighted that the overseas pending order book stands at a healthy ₹1,127 crores, providing strong visibility for future quarters.

    02

    Domestic Performance Muted, But Order Book Offers Hope

    In contrast to the overseas strength, the standalone domestic business posted a muted 3% YoY revenue growth, reaching ₹661 crores. Management cautioned against reading too much into quarterly numbers due to the lumpy nature of their project business. They pointed to a 12% increase in domestic order booking during Q3 and a robust standalone pending order book of ₹1,874 crores. The company maintained its guidance for double-digit revenue growth for the full FY25 for the standalone business.

    03

    Margin Expansion Continues on Efficiency Gains

    The company demonstrated strong operational leverage, with consolidated EBITDA margins expanding by 170 basis points YoY to 16.0%. Management attributed this improvement to a continuous drive on operating efficiency and strong performance in the higher-margin international business. For the nine-month period, EBITDA margin stood at 14.5%, an increase of 190 basis points, indicating a consistent trend of profitability improvement.

    04

    Disciplined Strategy on Solar Pumps and Government Contracts

    Management provided a detailed and transparent rationale for not participating directly in the government's PM-KUSUM scheme for solar pumps. Sanjay Kirloskar outlined significant risks, including 5-year performance guarantees, high working capital requirements due to delayed and conditional payments, and potential for liquidated damages. The company's strategy is to mitigate these risks by supplying pumps to integrators who assume the project execution risk, showcasing a disciplined approach to capital allocation.

    05

    Services Business a Key Focus for International Operations

    The services segment is a strategic priority, particularly in international markets. Alok Kirloskar noted that the company holds about 120 service contracts outside India, covering not just their own pumps but all pumps at a customer's site. In the UK, service revenue is around 38-39% of total UK revenue, and the company is expanding this model in Europe. This focus on services provides a stable, annuity-like revenue stream and helps improve overall margin profiles.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.