Stocks To Buy: Motilal Oswal Maintains 'Buy' On Cummins, Kirloskar Oil Engines; Here's Why

Motilal Oswal Report

Our channel checks with genset players indicate that demand was weak in October and November months of Q3 FY25 and has now started recovering. This weakness was more pronounced in the low-to-mid kVA ranges, which are price-sensitive and have much higher competition. Higher kVa ranges are still witnessing normal demand. Prices, as expected, have corrected by 6-7% but are still much higher on YoY basis.

Most channel partners are of the view that this transitionary phase will continue for one more quarter and demand will start normalizing after that. Overall revenue growth for Q3 FY25 is expected to be impacted for players focused on low-to-mid kVa ranges like Kirloskar Oil Engines Ltd., while for Cummins India Ltd., the impact seems to be limited on volumes.

Export markets have bottomed out and will start improving sequentially in the coming quarters. We maintain our positive stance on genset players and believe that after this transitionary phase, companies with a strong product portfolio and distribution network will benefit more in the medium to long run.

We marginally revise our estimates on Cummins and maintain Buy on both Cummins (target price: Rs 4,250) and Kirloskar Oil Engines (target price: Rs 1,540).

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