Capital Goods Stocks Outlook
Analysts see stock-specific opportunites
This story was originally published at 22:17 IST on 13 September 2024
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MUMBAI - Analysts pointed to expensive valuations in several mid-caps and small-caps in the capital goods sector. However, they said there were stock-specific opportunities present across the sector despite exuberance in some stocks.
Capital goods companies are witnessing strong demand for their products, which is expected to maintain their margins at elevated levels. But a lot of the positives are priced in several stocks, analysts said. For example, ICICI Securities said earlier this week that they like Astral due to its strong brand, comprehensive portfolio, and wide distribution, but they maintained a "hold" rating due to its limited upside. We await a better entry point, the brokerage said.
Among other concerns, the brokerage mentioned demand for pipes was muted during Jul-Aug due to volatility in polyvinyl chloride pipes. Owing to this, the brokerage expects volume growth in Jul-Sep to be in high single-digit to low double-digit, lower than the company's full year guidance of 16-18%.
At the same time, ICICI Securities was bullish on VA Tech Wabag, which won an order worth 27 bln rupees from Saudi Water Authority this week. This single order was almost equivalent to the company's revenue of 28.56 bln rupees in 2023-24 (Apr-Mar). With this order, the brokerage raised its target price for the company by 7% to 1,541 rupees. The stock closed at 1,402.95 rupees on the National Stock Exchange, up 2.2%.
This week, Nuvama Institutional Equities initiated coverage on Zen Technologies, which makes anti-drone systems, among others. It started the coverage with a "buy" rating and a target price of 2,200 rupees, indicating an upside of 32% from today's close. The brokerage was bullish on the company's strong orderbook, which would help it post a compounded annual growth rate of 54% in earnings per share between 2023-24 and 2026-27.
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Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:
| Company | Price | Week-on-week change in % | Resistance | Support |
| Bharat Heavy Electricals | 264.30 | 0.20 | 269.20 | 260.80 |
| CG Power and Industrial Solutions | 713.70 | 6.00 | 747.10 | 694.90 |
| Larsen & Toubro | 3613.00 | 1.10 | 3650.60 | 3581.20 |
| Siemens | 6710.25 | 1.50 | 6792.70 | 6624.80 |
| Thermax | 4730.55 | 9.20 | 4982.90 | 4548.90 |
| S&P BSE Capital Goods | 72654.01 | 2.10 | 73139.80 | 72321.30 |
| Nifty 50 | 25356.50 | 2.00 | 25497.90 | 25221.80 |
| S&P BSE Sensex | 82890.94 | 2.10 | 83318.70 | 82439.30 |
End
Reported by Anshul Choudhary
Edited by Vidhi Verma
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