Explained - Why Kirloskar Oil Engines shares are up 20%, the most in over a year

Shares of Kirloskar Oil Engines

Ltd. surged as much as 20% on Monday, June 22, marking their biggest single-day gain in over a year, after the company announced a major order win in the fast-growing data centre segment.

Kirloskar Oil Engines has secured an order from HyperNext, one of India's hyperscale data centre operators, for the supply of 96 units, or 192 MW, of its 2,500 kVA Optiprime Dual Core power systems.

The order underscores the growing acceptance of the company's high horsepower (HHP) products in India's rapidly expanding data centre market, a segment that has traditionally been dominated by larger global players.

Brokerage firm Motilal Oswal said the order validates Kirloskar Oil's strategy of expanding its presence in the power generation business and strengthening its position in the data centre ecosystem.

The brokerage believes the company's ongoing ₹700 crore capex programme announced in FY25, along with the proposed ₹1,400 crore investment unveiled in May 2026, will enable it to capture a larger share of opportunities in both the data centre and industrial segments.

Motilal Oswal also expects growth in the industrial business to be supported by the execution of large orders over the next two years, helping offset any slowdown arising from weak construction activity.

Improving volumes are likely to drive operating leverage and support margin expansion, the brokerage said.

The brokerage has raised its estimates for the power generation business and now expects slightly better profitability. It added that Kirloskar Oil's entry into the hyperscaler segment, coupled with strong momentum in its power generation and industrial businesses, could narrow the valuation gap with Cummins India over time.

Motilal Oswal maintained its 'Buy' rating on the stock and raised its price target to ₹2,350 from ₹1,900 earlier.

JM Financial echoed a similar view, saying that the 192 MW genset supply order from HyperNext marks a major breakthrough for Kirloskar Oil in the colocation and hyperscale data centre market, which has largely been dominated by Cummins India.

The brokerage said the development reinforces its view that Kirloskar Oil's valuation discount relative to Cummins India could continue to narrow as the company expands its product portfolio and reduces the technology and capability gap with larger peers.

JM Financial said that Kirloskar Oil's planned capacity expansion for HHP engines, which will add 20,000 engines annually, should be viewed in the context of rising opportunities in data centres and industrial power solutions.

According to the brokerage, a combination of new product launches, particularly in the HHP segment, recruitment of experienced talent from competitors and a growing export focus could drive further rerating in the stock.

JM Financial upgraded the stock to 'Buy' from 'Add' and increased its price target to ₹2,430 from ₹1,955.

The brokerage added that Kirloskar Oil currently trades at 40 times FY28 estimated earnings. While this is above its historical valuation range, it believes the premium is justified by the company's improving growth outlook and compares favourably with Cummins India.