From 2X3Y to 2B2B: execution earns the next leg

ICICI Securities' first pillar is a proven ability to deliver. Under its "2X3Y" roadmap, KOEL lifted consolidated revenue 1.6 times, from Rs 4,022 crore in FY22 to Rs 6,329 crore in FY25, while EBITDA and profit grew 2.9 and 2.8 times respectively. That record, the brokerage argues, earns the company the right to its next ambition: the "2B2B" strategy, targeting a Rs 16,000 crore-plus business by FY30, powered by market-share gains in high-horsepower engines, international expansion and a deeper push into defence, railways and non-engine lines.

Capacity is being laid down to match. The announced Kagal expansion is set to raise total engine capacity from roughly 1.35 lakh to 2.05 lakh units — an addition of about 48 percent — including specialised high-horsepower lines.

Two marquee orders that redraw the story

The re-rating case rests on KOEL's move from selling engines to solving mission-critical power problems. Two order wins, ICICI says, prove the point — and open segments long dominated by global incumbents.

The tailwind behind them is structural: India's data-centre capacity is projected to expand from about 1.8 GW in FY26 to roughly 10 GW by FY30, a compound rate near 54 percent, giving KOEL's high-horsepower franchise a long runway to scale.

Earnings on a steepening curve

After a softer FY25, standalone revenue is modelled to compound at nearly 23 percent through FY29E as capacity, premium mix and operating leverage compound together. The trajectory below tells the story.

The estimates above are on a standalone basis; the 1.6-times growth cited earlier is consolidated, which additionally captures the B2C and financial-services arms. Return on capital employed is modelled to climb to 22.5 percent by FY29E as high-value products lift the mix.

How ICICI builds the Rs 2,850 target

The target is a sum of three parts, with the core engine business doing almost all the heavy lifting. The single bar below shows how each contributes to the Rs 2,850 per-share value.

The premium 40-times multiple on the standalone engine business reflects, in the brokerage's words, KOEL's expanding capacity, rising exposure to data centres and industrial applications, and scope for a sustained earnings re-rating as it scales toward its medium-term ambitions.

The target for investors

ICICI Securities rates Kirloskar Oil Engines a BUY with a 12-month sum-of-the-parts target of Rs 2,850, an upside of roughly 28 percent from Rs 2,230. The balance sheet is a comfort — cash of Rs 553 crore against gross debt of just Rs 139 crore leaves the company effectively net-cash even as it funds a Rs 1,400 crore Kagal build-out. The counterpoint is volatility: the stock has re-rated sharply since the data-centre win and has swung between Rs 857 and Rs 2,720 over the past year, so the sensible frame is to accumulate into weakness and hold for the multi-year compounding rather than chase strength.

Key risks