Capital Goods Channel Check - Genset Demand Remains Strong In Q1 FY25: Motilal Oswal

Motilal Oswal Report

Our channel checks with genset players indicate that demand has been good so far in Q1 FY25, mainly driven by pre-buying. Leaving aside a minor impact on demand from elections in May 2024, demand is again strong in June-24, with faster decision-making from customers. Channel inventory for CPCB 2 is now largely over and players may see a higher share of CPCB 4+ sales in June-24.

Some part of demand driven by pre-buying from the residential and commercial segments may moderate in Jul-August 2024, while some end users will wait for price rationalization for initial few months of the norm change. Export markets are still weak and companies are already taking initiatives to export new products, which will start reflecting in a few quarters. We expect both Cummins India Ltd. and Kirloskar Oil Engines Ltd. to be ready with their CPCB 4+ product portfolio and have products in other nodes too to hedge against any temporary demand slowdown after the norm implementation.

We maintain our positive stance on key players in the genset industry and see Cummins India gaining market share in the current scenario. We maintain Buy on both Cummins (target price: Rs 4,300) and Kirloskar Oil (target price: Rs 1,500).

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