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Informist, Thursday, Nov. 14, 2024

MUMBAI – Shares of capital goods companies are seen in range next week as expectations of a pickup in government spending provide these companies with revenue visibility, but high valuations may push investors to sell these stocks on a rise, analysts said. Valuations are at the forefront this month with investors selling stocks with expensive valuations as overall earnings growth of Indian corporates slowed down in the first half of the financial year.  

Among major companies in the sector, Samvardhana Motherson reported its Jul-Sept earnings on Tuesday. Its consolidated net profit more than quadrupled on year to INR 8.80 billion, but fell short of analysts' estimate of INR 9.10 billion. Brokerages were bullish on the stock but expressed slight caution due to lower-than-expected margin during the September quarter. Samvardhana Motherson's EBITDA margin expanded to 8.9% in Jul-Sept from 8.5% a year ago.

"We expect H2 (Oct-Mar) margin to improve sequentially and be flat YoY. But we cut our EPS (earnings per share) estimates by around 9% in FY26-27 to factor in weak global automotive demand," Elara Securities said in a report post earnings. Elara Securities downgraded the stock to 'accumulate' from 'buy' and cut the target price by 9% to INR 194. Other brokerages also cut their estimates to factor in weak demand. Out of the five brokerage reports available with Informist, three had 'accumulate' or 'add' rating, while two had 'buy' rating.

Shares of capital goods companies have faced selling pressure for the past several months, which has intensified as the slowdown in earnings became apparent in Jul-Sept. The BSE Capital Goods index has fallen to levels last seen in June with the sectoral index down 13% from its lifetime high last touched in July. This week, the sectoral index fell nearly 5% to close at 66026.23 points.

TOP HEADLINES

* HEG Jul-Sept sales fall 7.6% on year, net profit rises 0.5%
* KSB Jul-Sept consol net profit rises 23.2% YoY to INR 617 million
* Thermax Jul-Sept consol net profit rises almost 25% YoY to INR 1.97 billion
* SKF India Jul-Sept net profit up 4.6% YoY at INR 943.4 million, below view
* Varroc Engg Jul-Sept consol PAT rises 2.7% YoY to INR 556.76 million
* Kalpataru Projects get orders worth INR 22.73 bln
* Earnings Review: Samvardhana Motherson posts strong growth, but misses view
* KNR Constructions Jul-Sept PAT rises over three-fold on year to INR 3.34 bln
* Kirloskar Oil Jul-Sept consol PAT rises 63.5% YoY to INR 1.28 billion
* BHEL wins contract from NTPC to set up thermal power plant in Telangana
* L&T gets nod to set up NTPC's thermal plants in Madhya Pradesh, Bihar
* L&T Tech, arm to buy 2 Intelliswift Software cos for up to $110 mln
* Elgi Equipments Jul-Sept consol PAT rises 3.8% YoY to INR 947.22 million
* Graphite India Jul-Sept net profit falls 78% YoY, sales down over 25%
* BEML Jul-Sept net profit falls 1.3% YoY, sales down 6.2%
* Inox India wins order to set up mini LNG terminal in The Bahamas
* IRCON Intl invests INR 54 million in arm Ircon Bhoj Morbe Expressway
* Action Construction Jul-Sept consol PAT rises 28.2% on yr to INR 948 million
* Inox India Jul-Sept consol net profit rises 7% YoY to INR 494.93 million

Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

Reported by Anshul Choudhary

Edited by Saji George Titus

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