The genset segment, a key contributor within the sector, has emerged as a bellwether of this trend, reflecting the broader recovery in industrial and infrastructure-linked activity.
Industry channel checks indicate that genset volumes grew by nearly ten to twenty percent year-on-year during the second quarter of fiscal year 2026, supported by increased offtake from data centers, manufacturing units, airports, hospitals, and educational institutions.
Demand from commercial real estate and quick commerce remains healthy, while the construction and rental segments continue to show softness. Overall, the demand trajectory remains structurally stable even as sequential momentum moderates due to seasonality.
Pricing across the industry has largely stabilized after the implementation of CPCB 4+ emission norms in mid-2024. Following a period of competitive discounting, most original equipment manufacturers have aligned their pricing strategies.
A modest price hike of three to five percent is expected in the next few quarters as input costs, particularly copper, inch upward. Meanwhile, pig iron prices remain benign, providing a cushion for margins.The medium- and high-horsepower genset categories continue to drive incremental growth, aided by expanding data center capacity and ongoing government projects.Industry participants are also focusing on strengthening their distribution networks and aftermarket reach, particularly for the new generation of CPCB 4+ compliant gensets.
The integration of telematics is expected to further boost service-led revenues over the next year. On the external front, engineering exports have shown consistent improvement since mid-2024, mirroring the uptick in global demand. However, near-term volatility persists due to geopolitical factors.
Overall, the medium-term outlook for the capital goods sector remains positive, supported by a broad-based recovery in industrial activity, infrastructure investment, and stable pricing dynamics.
While export performance and high-horsepower demand from data centers will remain key monitorables, the sector appears well-positioned for sustained growth through fiscal year 2026 and beyond
Cummins India – Target Price: Rs 4,500
Cummins is experiencing a broad-based recovery in its power generation segment, driven by strong demand from manufacturing, real estate, healthcare, hospitality, and data centers, pushing volumes back to pre-emission levels.
Its leadership in high-kVA products and a well-established product-distribution network are enabling market share gains. Industrial growth is expected to accelerate, supported by new product launches in railways, mining, and construction, leading to an 18% CAGR from FY25 to FY28.
The distribution business remains a stable growth engine, boosted by telematics, aftermarket penetration, and pricing power, with a projected 19% CAGR. Export growth benefits from rising global demand, especially for data centers and the Low Horse Power segment across various regions.
Additionally, Battery Energy Storage Systems (BESS) offer long-term growth potential. Overall, we forecast revenue, EBITDA, and PAT CAGR of 16%, 16%, and 17%, respectively, over FY25-28.
Kirloskar Oil Engines – Target Price: Rs 1,230
Kirloskar Oil Engines has demonstrated robust performance across its core business verticals. The power generation segment continues to show strong momentum despite the high base impact from pre-buying ahead of emission norm changes.
Demand remains healthy across infrastructure, real estate, and data centers, supported by the successful launch of the Sentinel and Optiprime product ranges and a strong nationwide service network.
The company is optimistic about growth in its industrial segment, underpinned by strategic defense and nuclear projects for the Indian Navy and NPCIL. Exports have gained momentum, particularly in the MENA region, driven by its OEM partnership model.
The B2C water management business continues to generate steady cash flows and maintains double-digit margins. With a diversified portfolio and efficient operations, we expect revenue, EBITDA, and PAT CAGR of 15%, 17%, and 18%, respectively, over FY25-28.
(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd.)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)