The Core Dilemma: Growth Momentum vs. Market Ruthlessness
In a market where leverage often dictates volatility, the corporate balance sheet has redeemed its status as the litmus test of long-term value. While many high-growth companies are currently fighting with rising debt-servicing costs, two lesser looked at engineering stocks are standing their ground firmly.
These companies, defined by near-zero debt and consistently high Return on Capital Employed (ROCE), however have faced a significant market correction, with share prices sliding more than 35% from their all-time highs. And this widening gap between fundamental strength and market valuation has caught the attention of smart investors.
Add to this the fact that smart money has shown strong interest in these stocks, despite the corrections. Let us look at both these stocks and try to see if they have the potential to be the next turnaround story.
Ajax Engineering: Managing the Transition in Construction Mechanization
Incorporated in July 1992, Ajax Engineering Limited manufactures a wide range of concrete equipment and services across the value chain.
With a market cap of Rs 5,362 cr, the company is India’s leading concrete equipment manufacturer, second largest in India by volume. It operates across the entire concrete application value chain production, transportation, placement, paving and advanced solutions like 3D concrete printing.
The company has an average 10-year ROCE of 28%, while industry peers average around 14%. In simple words, the company generates a profit of Rs 28 on every Rs 100 used as capital, while its peers hardly manage Rs 15. The current ROCE is also an impressive 34% and the industry’s current median is 25%.
This strong capital efficiency helps the company to keep away from debt and hence high interest payments. The company’s current debt is just Rs 55 lacs, and its debt-to-equity ratio is virtually 0. So, the company is making more than peers on the capital used and is not being pulled down by huge interest payments.
However, is the company’s lack of leverage hurting growth? Let us look at the financials to find out.
The sales for the company grew from Rs 736 cr in FY20 to Rs 2,074 cr in FY25, logging a compound growth of 23% in 5 years. Between April and December 2025, the company has logged sales of Rs 1,346 cr.
The EBITDA (earnings before interest, taxes, depreciation, and amortization) climbed from Rs 133 cr to Rs 318 cr in the same period, a compound growth of 19%. And at the end of Q3FY26 (December 2025), the EBITDA recorded by the company was Rs 150 cr.
The net profits grew at a compounded rate of 21% from Rs 100 cr in FY20 to Rs 260 cr in FY25. And for the first 3 quarters ending December 2025, the company has logged profits of Rs 130 cr.
The share price of Ajax Engineering Ltd was around Rs 595 in February 2021 and as on 16th February 2026 it was Rs 469.
At the current price, the stock is trading at a 38% discount from its all-time high of Rs 757 which it hit less than a year ago.
The stock is trading at a PE of 24x, while the current industry median is 32x. The 10-year median PE for the company and the industry median is 30x.
What is interesting is that while promoters hold a strong 80% stake in the company, 16% is held by smart money, Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs). FIIs hold 6% and DIIs hold 10% stake respectively, with names like SBI Funds, Pi Opportunities and Whiteoak Capital holding stakes.
In the most recent investor presentation in Feb 2026, the company’s MD & CEO, Shubhabrata Saha said that the last few quarters have been a period of challenges and transition. Extended monsoon, change in the emission norms, slower pace of project execution, cash flow challenges for our customers have all had an impact on the business.
However, the management remains fully confident in the long-term growth prospects of the business. The government’s strong and consistent focus on infrastructure development, along with the continuing transition towards mechanized construction and concreting equipment, is expected to drive steady demand, positioning Ajax well for sustained growth.
Kirloskar Pneumatic: Capitalizing on India’s Gas and Refrigeration Boom
Incorporated in 1958, Kirloskar Pneumatic Company Ltd is part of the Pune-based Kirloskar group.
With a market cap of Rs 7,473 cr, the company is a market leader in CNG systems and oil and gas refrigeration in India, having a market share of over 60% in both business segments. It is the world’s largest manufacturer of industrial gas compressors, with a 70% market share in Indian ammonia refrigeration compressor segment.
The company has a 10-year median ROCE of 32% which is impressive given it keeps up with the industry median of 33% for the same period.
When it comes to debt, the company has a current debt of just Rs 40 lakhs and maintains a debt-to-equity ratio of 0.
As for the financials (standalone), the company’s sales have jumped from Rs 829 cr in FY20 to Rs 1,629 cr in FY25 which is a compound growth of 14% in 5 years. For the first 3 quarters of FY26, the company has logged sales of Rs 1,054 cr.
EBITDA jumped from Rs 98 cr in FY20 to Rs 294 cr in FY25, logging a compounded growth of 25%. And between April and December 2025, the EBITDA recorded by the company was Rs 175 cr.
The net profits grew at a compound rate of 32% from Rs 53 cr in FY20 to Rs 211 cr in FY25, and for the 3 quarters ending December 2025, the profits logged were Rs 114 cr.
The share price of Kirloskar Pneumatic Company Ltd was around Rs 217 in February 2021 and as on 16th February 2026 it was Rs 1,150 which is a 430% jump in 5 years.
However, the stock has seen a correction from its all-time high of Rs 1,818 and is trading at a discount of 36% from this peak.
The company’s share is currently trading at a PE of 36x, which is closer to the current industry median of 37x. The 10-year median PE of the company is 32x and the industry median for the same period is 33x.
Coming to the smart money, FIIs hold around 7% stake in the company while DIIs hold 28% with prominent names like Tata Mutual Funds, Nippon India, HSBC Mutual Funds, HDFC Mutual Funds and Aditya Birla Sun Life holding stakes.
In the latest earnings call in January 2026, the Managing Director of the company, K. Srinivasan said that as on 1st January 2026, the company had orders on hand of Rs 1,939 cr and YTD sales of Rs 1,054 cr. The management expects to close the year with sales between Rs 1,800 cr to Rs 1,850 cr and a profit before tax at least between 20% to 25% higher than the previous year.
On the same call, the company has also approved an interim dividend at the rate of 175% on the face value of Rs 2 per share, which is Rs 3.5 per share.
The Rerating Roadmap: Strategic Value or Value Trap?
The current gap in the operational efficiency of Ajax Engineering and Kirloskar Pneumatic and their recent stock price performance is what we can call a classic “growth vs. price” mystery. On one hand, both companies have sturdy balance sheet health: virtually zero debt and industry-leading ROCE. On the other, the over 35% correction reflects a market that is aggressively repricing them amidst slowing project execution and shifting emission norms.
While the “smart money” remains interested in these stocks, the near-term recovery hinges on whether management can convert massive order books into bottom-line growth faster than the market’s patience changes. With Kirloskar anticipating a 20-25% jump in gross profits and Ajax navigating a transitional phase in construction mechanization, the technical discount is clear, but is it enough to offset the broader industrial cooling?
The central question remains: Is the current ruthlessness of the market a temporary mispricing of capital-efficient giants, or is it an early warning that even the cleanest balance sheets cannot fully insulate a stock from a sector-wide reset? The only way to find out is to add these stocks to your watchlist and keep an eye on them.
Disclaimer:
Note: We have relied on data from www.Screener.in and www.trendlyne.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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