2 Undervalued Industrial Equipment Stocks Trading Below Fair Value

India's industrial capital goods sector has benefited from a sustained capex upcycle across manufacturing, infrastructure and water management over the past few years. Not every stock in the space carries the same rich multiple. A screen of listed industrial equipment stocks against the sector's average price to earnings ratio surfaces two established names still priced below that benchmark.

Elgi Equipments and Kirloskar Brothers both currently trade below the broader industrial equipment industry PE, despite maintaining positive return on equity. This piece breaks down why each stock screens as undervalued, what the underlying financials show, and the risks that come with owning industrial machinery manufacturers.

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Why These Industrial Equipment Stocks Screen as Undervalued

The industrial equipment industry currently carries an average price to earnings ratio of close to 44 times trailing earnings across companies in this capital goods classification. A stock trading meaningfully below that average, while still posting positive return on equity and carrying manageable debt, is a reasonable starting point for a relative valuation screen.

Both companies below clear that bar, with Kirloskar Brothers running the lower leverage of the two, a distinction worth keeping in mind among industrial equipment stocks that otherwise look similarly undervalued on a headline basis.

The table below lists these two companies alongside their current price, valuation multiple and return ratios.

Company	NSE Ticker	CMP (Rs)	PE Ratio	Sector PE	ROE	Market Cap (Rs Cr)
Elgi Equipments	ELGIEQUIP	609.40	43.70	44.21	19.28%	19,568
Kirloskar Brothers	KIRLOSBROS	1,897.70	40.00	44.21	15.16%	15,090

Elgi Equipments: Highest ROE, Marginal Discount

Elgi Equipments manufactures air compressors and related equipment for industrial, automotive and infrastructure applications, with a growing export presence. The stock trades at a price to earnings ratio of 43.70, just below the sector average of 44.21, at a current price of around Rs 609.

Return on equity of 19.28 percent is the higher of the two industrial equipment stocks in this list, supported by a debt to equity ratio of 0.24. On an EPS of Rs 14.13 and book value of Rs 70.43, the price to book multiple works out to 8.77.

Kirloskar Brothers: Lower Leverage, Wider Discount

Kirloskar Brothers manufactures pumps, valves and hydro turbines for industrial, agricultural and infrastructure customers across India and select export markets. Its price to earnings ratio of 40.00 is a wider discount to the sector average of 44.21 than Elgi Equipments, at a current share price of around Rs 1,898.

Return on equity of 15.16 percent is lower than Elgi Equipments, though the debt to equity ratio of 0.10 is considerably lower, making it the more conservatively financed of the two. On an EPS of Rs 47.51 and book value of Rs 310.30, the price to book multiple of 6.12 is also lower than Elgi Equipments.

Valuation Snapshot: PE, PB and Dividend Yield

Beyond the headline price to earnings ratio, book value multiples and dividend yield add useful context for these industrial equipment stocks. Kirloskar Brothers looks cheaper on nearly every metric, while Elgi Equipments offers a slightly higher return on equity.

Company	Price to Book	Book Value (Rs)	Dividend Yield	Debt to Equity
Elgi Equipments	8.77	70.43	0.44%	0.24
Kirloskar Brothers	6.12	310.30	0.37%	0.10

Kirloskar Brothers trades at a lower price to book multiple and carries less leverage than Elgi Equipments, while Elgi Equipments compensates with a somewhat higher return on equity. Both dividend yields are modest, typical of capital goods companies reinvesting cash into capacity and product development.

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Risks to Consider Before Buying These Industrial Equipment Stocks

A discount to the sector average price to earnings ratio does not remove company specific risk in a business tied closely to industrial and infrastructure capex cycles.

Capex Cycle Dependence

Order inflows for compressors, pumps and turbines depend heavily on industrial and infrastructure capital expenditure. A slowdown in capex spending can quickly reduce order visibility.

Raw Material and Currency Exposure

Steel, castings and other metal inputs make up a large share of manufacturing costs, and currency movements on export orders and imported components can add further margin volatility.

Execution and Project Delays

Large infrastructure linked orders, particularly for pumps and turbines, often involve multi year execution timelines where delays can push revenue recognition later than initially guided.

Competitive Intensity

Both domestic and global competitors operate in the compressor and pump markets, and pricing pressure during periods of weak demand can compress margins across the sector.

How to Track These Industrial Equipment Stocks

Investors evaluating these two names should track quarterly order inflows, export revenue trends, and how the sector average PE moves relative to each company's own multiple over time, rather than relying on the valuation gap in isolation among industrial equipment stocks. Comparing these numbers regularly is the most reliable way to judge whether the discount to fair value remains intact or has already closed.

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Conclusion

Elgi Equipments and Kirloskar Brothers are the two industrial equipment stocks currently trading below the sector's average price to earnings ratio of close to 44 times, while both maintain positive return on equity. That combination makes them worth a closer look for investors who already want exposure to India's industrial capex theme, though capex cycle dependence and execution risk mean position sizing and diversification still matter when adding these names to a portfolio.

FAQs on Undervalued Industrial Equipment Stocks

Which industrial equipment stocks are trading below the sector average PE?

Ans. Elgi Equipments and Kirloskar Brothers are currently trading below the industrial equipment sector's average price to earnings ratio of close to 44 times, based on live NSE and BSE pricing.

Is Elgi Equipments undervalued compared to its sector?

Ans. Elgi Equipments trades at a price to earnings ratio of 43.70, just below the sector average of 44.21, while delivering a return on equity of 19.28 percent.

Why does Kirloskar Brothers trade at a wider discount than Elgi Equipments?

Ans. Kirloskar Brothers trades at 40.00 times earnings against a sector average of 44.21, a wider discount than Elgi Equipments, reflecting its slightly lower return on equity of 15.16 percent even with a more conservative balance sheet.

What is the market capitalisation of Kirloskar Brothers?

Ans. Kirloskar Brothers has a market capitalisation of around Rs 15,090 crore, with a price to earnings ratio of 40.00 against the sector average of 44.21.

Are these industrial equipment stocks debt free?

Ans. Neither is fully debt free, but both carry low leverage, with Kirloskar Brothers at a debt to equity ratio of 0.10 and Elgi Equipments at 0.24.

What are the main risks in undervalued industrial equipment stocks?

Ans. The main risks include dependence on industrial and infrastructure capex cycles, raw material and currency cost volatility, execution delays on large multi year orders, and competitive pricing pressure.

Is a low PE enough reason to buy an industrial equipment stock?

Ans. A price to earnings ratio below the sector average is a useful starting screen for industrial equipment stocks but not a standalone buy signal. Investors should also review order book visibility, export mix and balance sheet strength before investing.