Kirloskar Oil Engines shares surge 18% to record high after cracking Cummins-dominated data centre market

Kirloskar Oil Engines shares surged as much as 18% to a 52-week high of Rs 2,360 on the BSE on Monday, after the Indian generator maker secured a 192-megawatt order from hyperscaler HyperNext, a deal that analysts say marks a critical breakthrough into a market where rival Cummins Inc. has held more than 80% share.

The order, for 96 units of KOEL’s 2,500kVA Optiprime Dual Core Systems, is the largest and most strategically significant order the Pune-based company has won in the fast-growing data centre segment. For a stock and a company that has long traded at a discount to Cummins, the implications go beyond a single contract.

JM Financial, which upgraded the stock to BUY following the announcement, said its research indicates KOEL’s 2,500kVA Optiprime is equivalent to Cummins’ QSK65 offering, the American giant’s flagship product in the data centre space. “The data centre segment is dominated by Cummins (80%+ market share) and, thus, this news flow represents a key breakthrough highlighting reduced technology gap,” JM Financial said.

The same product had previously been deployed at a Mumbai data centre of a leading bank, but the HyperNext contract, with a global hyperscaler as the client, is a different order of magnitude in terms of market signal.

JM Financial raised its price target to Rs 2,430, lifting its valuation multiple to 42x FY28 estimated earnings per share from 35x earlier. “Given the reduced capability gap and strong growth outlook, we believe KOEL should trade at a similar multiple” to peer Kirloskar Cummins, the brokerage said.

Analysts raise targets, see structural re-rating

Motilal Oswal also maintained its BUY rating, sharply raising its target price to Rs 2,350 from Rs 1,900, rolling forward its valuation to September 2028. The brokerage projects revenue will grow at a 23% compound annual rate through FY29, with EBITDA and profit after tax expanding even faster at 29% and 32% respectively, driven by a better product mix and operating leverage.

“KOEL’s entry into hyperscalers as well as its fast-growing overall powergen and industrial business is resulting in a further reduction in the valuation discount versus Cummins,” Motilal Oswal said, adding that this trend “will play out as such orders increase.”

The brokerage noted that KOEL has already announced capital expenditure of Rs 7 billion in FY25 and an additional Rs 14 billion in May 2026, investments it said will allow the company to keep pace with surging data centre demand while also growing its non-high-horsepower product lines.

Beyond the data centre order

Analysts were careful to note that the bull case for KOEL is not solely dependent on data centres. Motilal Oswal flagged that large industrial orders are expected to drive deliveries over the next two years, which could more than offset any drag from subdued construction activity in India. With volumes scaling, operating leverage is expected to kick in, supporting the margin expansion thesis baked into both brokerages’ models.At Monday’s high, KOEL was trading at approximately 42x FY28 earnings on a core business basis — expensive relative to its own history, JM Financial acknowledged, but still offering value relative to Cummins given the higher expected growth trajectory.

The day’s move puts the stock up sharply for the year and raises a pointed question for investors who have long assumed Cummins’ dominance in Indian data centres was unassailable: if KOEL can win at a hyperscaler, the competitive landscape may be changing faster than the market had priced in.