For 2QFY2016, Kirloskar Oil Engines (KOEL) reported a disappointing set of numbers. Its top-line for the quarter declined by 6.0% yoy to Rs590cr. The raw material cost declined by 286bp yoy to 62.3% of sales while employee expense increased by 79bp yoy to 8.5% of sales, and other expenses increased by 405bp yoy to 21.0% of sales. This resulted in the EBITDA margin contracting by 198bp yoy to 8.2%. Other income increased by 61.1% yoy to Rs20cr and consequently, the net profit remained flat at Rs36cr. Outlook to remain subdued in the near term: In the near term, we expect the company to witness some pressure on account of overall slowdown in the Genset industry. In addition, the absence of large engines orders has been impacting the top-line and profitability. KOEL has expanded its capacity in the past and is positioned to successfully cater to improvement in demand once the operating environment changes in the longer run. KOEL also has taken measures to increase its focus on exports which should aid growth. Cash rich position: KOEL is a debt free company with cash and cash equivalents of approximately Rs835cr. With ample capacity in place, there is no major capex expected...