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Informist, Monday, Jun. 9, 2025

 

By Shakshi Jain

 

NEW DELHI – The aggregate March quarter revenue growth of the 18 capital goods companies that are part of the Nifty 200 was the slowest in eight quarters on a year-on-year basis. Their net profit growth during the same period was the lowest in 14 quarters, as was their bottom line growth exclusive of one-time gains and losses. A higher increase in total expenses compared to the revenue growth kept these companies from achieving stronger bottom line growth for the quarter.

 

The revenue of the 18 companies rose nearly 9% on year in the March quarter. Sequentially, the top line was up almost 22%, marking the sector's best performance in four quarters. The net profit grew just around 4% on year but more than 55% sequentially. Excluding exceptional items, these companies logged an adjusted net profit growth of 1.4% on year and a sequential surge of 51.5%.

 

This difference in the on-year net profit growth and adjusted net profit growth was largely driven by a one-time gain reported by Larsen and Toubro Ltd. that accounted for nearly 3% of the overall bottom line of these companies for the quarter. Overall, 50% of the companies in the pack of 18 reported a decline in their adjusted net profit for the March quarter.

 

A slower sequential rise in total expenses compared to revenue growth, at 18%, and a sharp rise of nearly 28% in other income helped the robust on-quarter performance of the 18 capital goods companies in Jan-Mar. On year, total expenses of the companies rose almost 10% in the March quarter, led by a 29% rise in the cost of materials consumed. Input costs accounted for 40% of the total expenses of these companies in the March quarter. Further, other operating income of these companies fell nearly 14% on year with a simultaneous increase of over 10% in their depreciation and amortisation expenses for the quarter. These companies also saw a substantial 479% on-year rise in their deferred taxes during the quarter.

 

Among the various sub-segments, technology-enabled power equipment companies led the pack of capital goods companies in the recently concluded earnings season. "Electrical equipment players across the HV (high voltage) value chain (transformers, switchgears, gensets, turbines) continue to enjoy multi-year high OPM (operating profit margin) levels driven by better pricing, product mix, operational efficiencies and higher CUF (capacity utilisation factor)," Nuvama Institutional Equities wrote in a report on Jun. 2.

 

REVENUES TRAIL ESTIMATES 

With only six out of 16 capital goods companies beating the Street's estimates on sales for the March quarter, the group of 16 collectively clocked revenue growth of 9% on year in Jan-Mar, against expectations of a rise of over 12%. The six companies were Bharat Dynamics, Bharat Electronics, CG Power and Industrial Solutions, Hindustan Aeronautics, Mazagon Dock Shipbuilders, and Polycab India. There were no pre-earnings research reports available on two companies – Rail Vikas Nigam and Tube Investments of India.

 

In terms of net profit, 10 out of the 16 companies beat analysts' estimates to help the group achieve collective growth of almost 6%, against expectations of a decline of 5% on year. If the impact of exceptional gains and losses for the March quarter is excluded, the 16 companies beat analysts' expectations with near 3% cumulative growth on year. The six underperformers with respect to bottom line growth estimates were ABB India, Bharat Dynamics, Bharat Heavy Electricals, CG Power and Industrial Solutions, Container Corp. of India, and Mazagon Dock Shipbuilders. 

 

Among the 16 companies in the sector, the six capital goods companies that are part of the Nifty 100 collectively clocked sales growth of over 7% on year for Jan-Mar. Their net profit growth improved more than 8% on year. Excluding one-time gains and losses, their net profit rose over 4%. In contrast, sales of the other 10 capital goods companies in the Nifty Midcap 100 pack grew 16% on year but their bottom line fell nearly 3%. None of these companies reported an exceptional item for the March quarter. 

 

SECTORAL OUTLOOK

Even as several companies in the capital goods sector failed to meet estimates for the March quarter, analysts are bullish on the sector in the medium-to-long term. Stocks point towards a recovery amid a healthy pace of growth in order books, they said. As of Friday, the BSE Capital Goods Index was down 7.2% from its lifetime high of 76,271.56 touched in July. While public expenditure remains focussed on select sub-segments such as defence and railways, sectoral analysts are hopeful of a pick-up in private capex with softening of interest rates.

 

"We remain selectively positive on public capex/TBCB-led (tariff-based competitive bidding) sectors (power generation/T&D (transmission and distribution) and railways) coupled with private capex in new-age areas (green hydrogen, electronics and data centres)," Nuvama said in the report. On March quarter results, the brokerage said large ticket-size high-voltage direct current equipment ordering has already picked up pace in the last six months and will continue to be strong over the next two to three years. Further, while premium valuations remain a key concern, the power transmission and distribution and thermal category may still deliver earnings growth surprises, it added.

 

The following table shows the performance of the 18 companies in the capital goods sector vis-a-vis the consensus estimate for each company, as well as against the consensus estimate for the capital goods sector and the Nifty 200 index:

 

Company	PAT beat analysts' estimate	Adjusted PAT growth %	Adjusted PAT growth estimate %	PAT beat sector estimate	PAT beat Nifty 200 estimate	Revenue beat analysts' estimate	Revenue growth %	Revenue growth estimate %	Revenue beat sector estimate	Revenue beat Nifty 200 estimate
Capital goods sector		1.38	(-)4.98				8.66	12.22
Nifty 200			0.78					5.2
APL Apollo Tubes	Yes	71.97	47.79	Yes	Yes	No	15.59	17.55	Yes	Yes
ABB India	No	3.34	7.86	Yes	Yes	No	2.57	9.26	No	No
Astral	Yes	(-)1.93	(-)11.44	Yes	No	No	3.46	5.40	No	No
Bharat Dynamics	No	(-)5.54	71.66	No	No	Yes	108.05	103.52	Yes	Yes
Bharat Electronics	Yes	18.01	-2.50	Yes	Yes	Yes	6.93	4.45	No	Yes
Bharat Heavy Electricals	No	4.07	32.55	Yes	Yes	No	8.88	33.52	No	Yes
CG Power and Industrial Solutions	No	13.45	20.87	Yes	Yes	Yes	25.60	22.65	Yes	Yes
Cochin Shipyard	Yes	7.57	3.37	Yes	Yes	No	34.73	38.87	Yes	Yes
Container Corp. of India	No	0.15	17.96	Yes	No	No	(-)1.56	5.44	No	No
Cummins India	Yes	(-)7.15	(-)10.22	No	No	No	6.08	16.23	No	Yes
Hindustan Aeronautics	Yes	(-)7.78	(-)29.86	No	No	Yes	(-)7.24	(-)11.38	No	No
Larsen & Toubro	Yes	16.73	11.88	Yes	Yes	No	10.90	14.00	No	Yes
Mazagon Dock Shipbuilders	No	(-)50.03	(-)24.08	No	No	Yes	2.28	(-)18.87	No	No
Polycab India	Yes	33.09	15.24	Yes	Yes	Yes	24.93	19.68	Yes	Yes
Rail Vikas Nigam		(-)13.84		No	No		(-)5.31		No	No
Siemens	Yes	(-)24.75	(-)34.88	No	No	No	2.48	30.98	No	No
Supreme Industries	Yes	(-)17.16	(-)28.69	No	No	No	0.64	3.27	No	No
Tube Investments of India		(-)72.35		No	No		14.70		Yes	Yes

 

The following table shows the profit margins of capital goods companies that are part of the Nifty 200:

 

Company	Adjusted PAT margin for Mar-25	Adjusted PAT margin for Mar-24	Adjusted PAT margin for Dec-24
Capital goods sector	10.67	11.43	8.58
Nifty 200
APL Apollo Tubes	5.32	3.58	11.173.99
ABB India33.81	15.02	14.91	15.70
Astral	10.59	11.17	8.17
Bharat Dynamics	15.35	33.81	17.68
Bharat Electronics	23.08	20.91	22.86
Bharat Heavy Electricals	5.60	5.86	1.71
CG Power and Industrial Solutions	9.88	10.94	9.56
Cochin Shipyard	17.24	21.60	17.23
Container Corp. of India	13.24	13.02	15.60
Cummins India	21.22	24.24	16.66
Hindustan Aeronautics	28.89	29.06	20.59
Larsen & Toubro	6.75	6.41	5.19
Mazagon Dock Shipbuilders	10.30	21.08	24.44
Polycab India	10.40	9.76	8.76
Rail Vikas Nigam	5.88	6.47	6.43
Siemens	17.71	24.12	17.72
Supreme Industries	9.71	11.80	7.45
Tube Investments of India	1.06	4.40	4.02

 

End

 

Edited by Avishek Dutta

 

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