Views on Kirloskar Oil Engines results - Angel Broking

Views of Ms. Tejashwini Kumari (Equity Research Associates-Mid Caps, Angel Broking) on Kirloskar Oil Engines results:

"Kirloskar Oil Engines (KOEL) reported a mixed set of numbers for 4QFY2014. The top-line has come in line with our expectations at Rs 632cr, 7.6% higher yoy. However, the operating margin contracted by 236bp yoy to 11.6%, against our estimate of 13.1%. The disappointment was mainly because of higher-than-expected raw material cost as a percentage of net sales. Consequently the company reported a net profit of Rs 50cr, lower 16.1% on a yoy basis, and against our estimate of Rs 55cr.

On an annual basis, the company's top-line was almost flat at Rs 2,287cr. On account of higher raw material and employee costs, the company's operating margin contracted by 143bp yoy to 11.9%, against our expectation of 12.3%. Depreciation and other income was broadly in line with our expectation. For FY2014, the company has successfully reduced its working capital cycle to 4 days.

With capacity expansion already in place and minimum capex requirement in near future, we continue to be positive on the company from a longer term perspective. A revival in the economy coupled with operating leverage will be strong driving factors for the company's growth. Hence, we maintain our Buy recommendation on the stock."

Source : Equity Bulls

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