Leading brokerage houses have reiterated their constructive stance on Kirloskar Oil Engines following its recent order win from HyperNext for the supply of 96 units (192MW) of its patented OptiPrime Dual Core power systems for a hyperscale data centre project.
Analysts view the order as a significant strategic breakthrough that reinforces KOEL’s technological capabilities in high-growth segments.
JM Financial has increased the target price to ₹2,430 from ₹1,955. According to the brokerage house, KOEL’s successful entry into the hyperscale data centre segment significantly reduces the perceived technology gap with peers.
“The development reinforces our view that with multiple product introductions and reduced technology gap (or capability gap) the valuation discount of KOEL versus Cummins will diminish,” said the brokering firm.
Analysts highlighted that KOEL now has data-centre-rated offerings with 2,500 kVA+ engines and has accelerated product development across high-horsepower (HHP) engines, marine propulsion systems and alternate fuel technologies.
Axis Capital factors in healthy ramp-up in HPP revenues, raising FY28-29E EPS by 6-10 per cent and target PE to 33 times (30 times earlier). The brokerage expects KOEL to benefit from the expected rise in DC capex on the back of OptiPrime’s high power density and data centre-specific design.
“Given commitments from global majors to add 3-6GW of DC capacity by FY30, we expect powergen capex of ₹15,000 crore over FY26-30E for HHPs”, it added.
Motilal Oswal Financial Services expects the company’s ongoing and planned capacity expansion initiatives to strengthen its ability to participate in high-growth opportunities across hyperscale, co-location and edge data centres.
“KOEL’s entry into hyperscalers and its fast-growing overall powergen and industrial business is resulting in a further reduction in the valuation discount versus Cummins, which we believe will play out as such orders increase”, said Motilal Oswal.
Brokerages also pointed to KOEL’s recently announced over ₹1,400 crore capacity expansion at Kagal, which will add 20,000 engines annually and support future growth in HHP engines, OptiPrime systems, exports and industrial applications.
Combined with the earlier expansion project, total manufacturing capacity is expected to support ₹500-600 crore additional sales by FY30. In addition to data centres, analysts remain constructive on KOEL’s industrial and export businesses.