Capital Goods Sector Check - Genset Demand Remains Strong In Q2: Motilal Oswal

Motilal Oswal Report

Our channel checks with genset players indicate that demand has remained strong in Q2 FY25, barring initial few days of norm shift. Demand is driven by channel inventory filling, along with fresh demand from other user industries.

The festive season from Sep-24 to mid-Nov-24 too will keep genset demand strong. Some part of the demand, which was earlier driven by pre-buying from the residential and commercial segments, moderated in Jul-Aug-24.

Prices are higher by 20-40% and may remain high until the festive season, after which we can expect some moderation. Thus, our initial reading indicates that volumes have likely improved YoY but may have declined 10-12% QoQ.

Overall revenue growth for Q2 FY25 will be supported by price increases too. Export markets are growing selectively and an uptick will start reflecting in a few quarters.

We maintain our positive stance on key players in the genset industry and see Cummins India Ltd. gaining market share in the current scenario, with strong demand in the below-800kVa and HHP segments.

We maintain Buy on both Cummins (target price: Rs 4,300) and Kirloskar Oil Engines Ltd. (target price: Rs 1,540).

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