Kirloskar Pneumatic Co Ltd
Capital Goods Equipment Manufacturer
FV – Rs 10; 52wks H/L –730/434; TTQ – 1372; CMP (Dec 16, 2015) –Rs 690.75; Market Cap – Rs 880 Crs

Standalone Financials and Valuations for H1FY16 (Amt in Rs Crs unless specified)

Financials and Valuations for FY15 (Amt in Rs Crs unless specified)

The share price of Kirloskar Pneumatic Co Ltd has moved up by 42% in last two months from Rs 484.8 (16/10/2015) to Rs 690.75 (16/12/2015).

The company has no long term debt.

Pneumatic Holdings Ltd has become the holding company of Kirloskar Pneumatic Company Ltd from September 2015 onwards.

The company attributes decline in the revenue to lack of investments in major sectors such as Oil & Gas, Power, Steel, Cement, Railways and Defence.

The company had bagged and executed significant projects during the period 2010-13. This was the time when oil and gas sector went in for modernization of the facilities and capacity additions. However since 2013 there has not been any significant investment in this sector by both the Government as well private sector. CNG stations have not grown in the recent past due to infrastructure issues and policy guidelines. Coupled with this oil and gas prices globally went down.

The company believes FY 16 to be a year of a transition for Oil & Gas sector. In order to de-risk this challenge of growth, the company has set up an International Business Division. The company has been approved by major consultants and contractors in Middle East and South East Asia. The Company’s management is overall positive on this development, “A team of sales and marketing is travelling to the region and promoting KPCL capabilities. Cold chain market is expected to grow at 10% annually. However implementation of government programmes for developing this market will have to be watched carefully. Your company, with its extensive distribution network and delivery process is confident of seizing the opportunity as and when they appear. Industrial markets will see upturn in next two to three years. Company has invested into developing new technology products. This will offer a competitive edge to regain its leadership position. To reach to smaller markets, company has been expanding dealer network aggressively. This will enable to increase market access and reach. The Government of India is aggressively modernizing defence installations. Your company with strong references expects to play an important role in this “Make in India” programme. However delays in finalizing orders may dampen the demand. Your company expects more international players to start business in India. But your company is strongly poised to take on this competition.”

Overview:
Kirloskar Pneumatic Company Limited is engaged in the manufacture of compressors, gears and gear boxes. It operates in two segments: Compression Systems and Transmission Products.

Its Compression Systems segment offers products, which include air, gas and refrigeration compressors, packages and systems, to the oil and gas, cold chain and other industrial markets. The Company offers refrigeration and gas compression systems for refineries, petrochemical plants and compressed natural gas (CNG) stations; ammonia compressor and packages for the cold store units, dairy units and pharmaceutical plants; air compressors and packages for cement, steel, power, and engineering and other markets, and heating, ventilating and air conditioning systems and air compressor packages for defence sector. Its key customers include ONGC, Reliance, Jindal, BPCL, HPCL and Shell.

The Company’s Transmission Products segment offers traction gears, customized gearboxes and specialized products for Indian Railways, wind power projects and other industrial markets. It serves locomotive manufacturing units of Indian Railways. However demand for railways gears and pinions was lower by 24% in FY 15, due to excessive inventory at locomotive works. KPCL has been manufacturing and selling gearboxes for wind turbines. These gear boxes can be classified into kilowatt class and megawatt class. Company is a leader in kilowatt class gearbox. For last two years new wind farm projects are very few. With a change in the Government policy on wind power projects the demand for gearbox has reduced substantially. Company’s major customers in this sector have gone bankrupt and closed down. This market is not expected to grow in FY 16 as well.

KPCL also serves defence sector with products like HVAC (heating, ventilation, and air conditioning) systems and air compressor packages. This is a tender based business and includes new equipment as well as service business. During the year 2014-15 this business dropped by 28% owing to delays in finalizing orders.

Management:
Mr Rahul C. Kirloskar is the Executive Chairman
Mr Aditya Kowshik is the Managing Director

None of the promoter’s holding is pledged

Consolidated Financial Trends ~ Amt in Rs Crs

Segmental Results ~ Amt in Rs Crs