Kirloskar Industries Ltd Upgraded to Hold by MarketsMOJO on Improved Technicals and Valuation

Technical Trends Shift to Mildly Bearish

The primary catalyst for the upgrade lies in the technical assessment of Kirloskar Industries Ltd’s stock. The technical grade has improved from a bearish stance to mildly bearish, indicating a less pessimistic outlook on price momentum. Key technical indicators present a mixed but improving picture. The Moving Average Convergence Divergence (MACD) remains bearish on both weekly and monthly charts, signalling that downward momentum has not fully reversed. However, the Relative Strength Index (RSI) on the weekly timeframe has turned bullish, suggesting short-term buying interest is gaining traction.

Bollinger Bands continue to show mild bearishness on weekly and monthly scales, while daily moving averages also reflect a mildly bearish trend. The Know Sure Thing (KST) oscillator remains bearish across weekly and monthly periods, but Dow Theory readings have improved to mildly bullish on the weekly chart, with no clear trend on the monthly. On-balance volume (OBV) is mildly bullish weekly, indicating some accumulation by investors. These mixed signals collectively justify a cautious upgrade in technical sentiment, reflecting a potential bottoming out of the stock price.

Valuation Remains Attractive Despite Profit Pressure

Kirloskar Industries is currently trading at ₹3,170, up 1.18% from the previous close of ₹3,133. The stock remains well below its 52-week high of ₹4,650 and above its 52-week low of ₹2,692.05, indicating a wide trading range over the past year. Despite a negative return of -17.35% over the last 12 months, the company’s valuation metrics remain appealing. The Return on Capital Employed (ROCE) stands at 7%, and the Enterprise Value to Capital Employed ratio is a low 0.6, signalling undervaluation relative to capital efficiency.

Compared to peers, Kirloskar Industries trades at a discount to historical averages, which supports the Hold rating. However, the stock’s underperformance relative to the broader market is notable. While the BSE500 index has delivered a 7.87% return over the past year, Kirloskar Industries has lagged significantly. This divergence highlights the need for investors to weigh valuation appeal against recent profit declines and market sentiment.

Financial Trend Shows Positive Growth with Some Profitability Concerns

Kirloskar Industries has demonstrated robust top-line growth, with net sales expanding at an annualised rate of 33.28% and operating profit growing at 24.60%. The company’s ability to service debt remains strong, evidenced by a low Debt to EBITDA ratio of 1.07 times and a debt-equity ratio of just 0.19 times as of the half-year mark. Operating profit to interest coverage is notably high at 7.12 times, underscoring financial resilience.

Despite these positives, profitability has faced headwinds. Over the past year, profits have declined by 25.8%, contributing to the stock’s negative return. Dividend payout ratio remains modest at 9.08%, reflecting a conservative approach to shareholder returns amid profit pressures. These mixed financial signals support a Hold rating, as growth prospects are tempered by recent earnings softness.

Quality Assessment and Promoter Confidence

The company’s quality metrics remain stable, with a Mojo Score of 51.0 and a Mojo Grade upgraded to Hold from Sell as of 4 February 2026. This reflects a moderate confidence level in Kirloskar Industries’ fundamentals. However, a notable concern is the reduction in promoter stake by 0.65% in the previous quarter, bringing their holding to 71.87%. Such a decrease may indicate waning promoter confidence, which could weigh on investor sentiment going forward.

Long-term returns have been impressive, with a 10-year return of 423.97% significantly outperforming the Sensex’s 244.38%. Over five years, the stock has returned 277.29%, again well ahead of the benchmark’s 65.60%. This historical outperformance contrasts with recent underperformance, suggesting a transitional phase for the company.

Market Performance and Outlook

Kirloskar Industries’ recent market performance has been mixed. The stock has marginally declined by 0.38% over the past week and 2.94% over the last month, slightly underperforming the Sensex’s 1.79% and 2.27% gains respectively. Year-to-date returns are also negative at -0.33%, compared to the Sensex’s -1.65%. This short-term underperformance contrasts with the company’s strong long-term growth trajectory.

Technically, the stock’s price action today ranged between ₹3,115.30 and ₹3,245.60, closing near ₹3,170. The mild improvement in technical indicators suggests a potential stabilisation phase, but the overall trend remains cautious. Investors should monitor upcoming quarterly results and promoter activity closely to gauge future momentum.

Conclusion: A Balanced Hold Recommendation

The upgrade of Kirloskar Industries Ltd’s rating from Sell to Hold reflects a balanced assessment of improving technical signals, attractive valuation, solid financial trends, and stable quality metrics. While the company faces challenges such as declining profits and reduced promoter confidence, its strong debt servicing ability, healthy sales growth, and discounted valuation relative to peers provide a foundation for cautious optimism.

Investors are advised to maintain a watchful stance, recognising the stock’s potential for recovery amid mixed signals. The Hold rating encapsulates this prudent approach, suggesting that while Kirloskar Industries is not yet a clear buy, it has moved beyond the sell territory and may offer value as conditions evolve.

Unlock special upgrade rates for a limited period. Start Saving Now →