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Shares of most capital goods and engineering companies, except Larsen and Toubro, are seen in the red next week owing to lack of visibility in orders and government spending. We expect the moderating trend in revenue growth to continue in 4QFY13E, up 4.8% YoY (v/s 8% YoY in 9MFY13), impacted by depleting order book and execution constraints due to overall economic slowdown. However, shares of engineering and infrastructure major Larsen & Toubro, which are trading at attractive valuation at present, could see some gains next week on account of value buying. Investors are likely to bank on L&T going forward as the company is seen meeting its order inflow guidance for Jan-Mar. L&T appears well-poised to comfortably exceed the lower end of FY13 order inflow growth guidance of 15-20% (JPM estimate of Rs 831 bn inflows, up ~18% YoY). Except L&T, none of the other large cap capital goods and engineering companies have seen booking significant orders, especially the ones manufacturing power sector equipment. Ordering activity is still sluggish, particularly in the industrial and power generation segment. Structural issues like SEB (State Electricity Board) finances (for power sector), land/water/environment and tight liquidity for project financing continue to remain challenges for capex upturn. Shares of Avantha Group owned-Crompton Greaves are seen falling further as investors remain cautious amid fears Jan-Mar could be another weak quarter. Investors also fear the company could announce further restructuring cost for the company's Belgium facility. There is no proper disclosure on the restructuring costs of the Belgium facility. The shares of the electrical equipment maker, which ended at 91.70 rupees today, could fall till 85 rupees.
