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The Kirloskar Oil Engines stock closed 2.4 per cent higher at Rs 189.95 on the BSE. The company, point out brokers, is a market leader in the non-automotive engines segment which is growing at about 17-18 per cent in the last two years.

The rising demand from user segments (industrial, power generation, marine applications) coupled with an increase in exports is expected to drive top line and profitability growth.

Analysts say they will track the company in the context of demand generated by the agri sector for mid- and small-sized engines as well as by the powergen space for higher-end products.

With a CAGR of 24 per cent in net profit over 2006-2008, the ROCE (return on capital employed) and ROE (return on equity) levels may well remain at 22 per cent and 16 per cent, respectively (fiscal 2007 estimate). The current price discounts 2007 and 2008 estimates by 14x and 11x, respectively.

Nilanjan Dey

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