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Informist, Friday, May 16, 2024

MUMBAI – Gains in capital goods stocks are expected to be limited next week after strong gains in the past several weeks, which have led to high valuations for several companies in the sector, analysts said. However, analysts remain positive on the sector as March quarter results have raised hopes of a revival in earnings growth.

Defence-related stocks, which have been in the limelight due to India-Pakistan tensions, may see only limited gains next week as some investors may choose to book profits after they surged recently on hopes of orders from the government.

The March quarter earnings of capital goods companies are pointing towards recovery and the sentiment may continue in the coming weeks, analysts covering the sector said. They are bullish on chances of a revival in capital expenditure by private players and the continued momentum in public sector capital expenditure. "Companies are also banking on strong capital expenditure in the Middle East," Amit Anwani, a research analyst at Prabhudas Lilladher, said. He expects more companies to exceed earnings expectations in FY26, with electrical cable, substation, and transformer companies likely to report strong earnings growth.

"In the near-to-medium-term, there are strong structural tailwinds for this sector," said Nirav Karkera, who heads research at Fisdom. "Besides a revival in private sector capex, softening of policy rates will take pressure off margins for the sector as the cost of servicing debt drops."

However, China's aggressive attempts to regain its status as a global manufacturing superpower may pose a risk for domestic manufacturing and dilute some foreign investment interest from domestic capital goods manufacturing companies, Karkera said. Further, a meaningful improvement in US-China relations may trigger a fall in Indian capital goods stocks.

Among major capital goods companies, Bharat Electronics will report its quarterly earnings Monday. The Navratna company is expected to report a 3% on-year decline in its March quarter net profit to INR 17.4 billion. Revenue growth is seen tapering off to about 4% on year at INR 89.1 billion from 15-40% growth seen in the previous four quarters. Among other companies, Solar Industries and GE T&D will report their quarterly earnings on Tuesday and Friday, respectively.

This week, Elara Securities affirmed its 'buy' rating for RITES with a target price of INR 335, up from INR 325 earlier on the back of a record increase in order inflows during 2024-25 (Apr-Mar) and expectations of a rebound in exports from FY26. The brokerage downgraded its rating for ABB India to 'reduce' from 'accumulate' and cut the target price by 5% to INR 5,580.

TOP HEADLINES

* SKF India Jan-Mar PAT rises 16% on year as raw material costs fall
* Inox India Jan-Mar consol PAT rises 48.6% YoY to INR 655.13 million
* L&T acquires 2.98% stake in E2E Networks, now holds 18.99% stake
* Kalpataru Projects gets orders worth INR 23.72 bln in T&D, building ops
* Earnings Outlook: Power segment seen boosting BHEL's March quarter revenue
* Kirloskar Oil Engines Jan-Mar consol PAT falls 12% YoY to INR 1.31 billion
* Kirloskar Brothers appoints Bhavesh Chheda as CFO effective Wednesday
* Kirloskar Brothers Jan-Mar consol PAT falls 9.9% on year to INR 1.37 bln
* Graphite India Jan-Mar sales fall 8.6% on year but PAT rises 82%
* V-Guard Industries Jan-Mar PAT falls 1.4% YoY to INR 780.6 million
* RITES Jan-Mar sales fall 3.2% on year but PAT rises 9.2%
* L&T lowest bidder for INR 11-bln Andhra secretariat tower tender - Source
* KEC International issues INR-5.12-bln corporate guarantee for subsidiary
* Syrma SGS Technology Jan-Mar consol sales fall 18.5% YoY, PAT rises 87.3%
* Earnings Review: High cost of materials pulls down Siemens PAT by 25% on yr
* L&T's building, factories vertical bags large order from Centre, state govts
* Earnings Outlook: Slow orders may hurt Siemens Jan-Mar financial show
* IPO Alert: Ravi Infrabuild Projects files DRHP for up to INR-11-bln IPO
* Caborundum Jan-Mar consol PAT falls 78.4% YoY to INR 291.4 million
* KEC International bags orders worth INR 10 bln across businesses
* Analyst Concall: ABB India says orderbook giving revenue visibility for 2025
* Madhya Pradesh govt OKs allotment of 148 acres to BEML to set up mfg unit
* BHEL confirms board nod to JV with REC arm in clarification to news report
* L&T lowest bidder for 2 housing projects in new Andhra capital, says source
* Earnings Review: ABB India Jan-Mar PAT up 3% YoY, slowest growth in 18 qtrs
* Thermax Jan-Mar consol PAT rises 8.1% YoY to INR 2.06 billion
* Fitch revises Samvardhana Motherson's, arm's outlooks to stable from positive
* Chhattisgarh govt approves allotment of 100 acres to BEML to set up mfg unit

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 Shakshi Jain

Edited by Saji George Titus

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