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Most stocks of capital goods companies are seen trading down, as delay in projects, higher expenditure, and margin pressure continue to hurt the companies' profitability. Projects are delayed as clients are going slow on capex (capital expenditure), payments are deferred, which has led to delay in booking revenues, even as expenditure continues, resulting in margin pressure and deterioration of working capital New project announcements have further dried up, which points towards subdued industrial and capital expenditure activity in the coming quarters also, affecting order inflow for capital goods companies. Headwinds in the power sector have limited order visibility further for companies, especially from private utilities.
The investors expect some order inflow from the state and central Utilities. However, they feel finalisation of these orders is likely to be delayed due to various factors including fuel crisis, constraints in land acquisition, and poor health of state electricity boards. Overall, the outlook remains challenging in the short-term. Government measures to fast-track projects and framing of restructuring policies for state electricity boards to improve their financial condition is a long-term positive. The preferred stocks for investors for the week are the companies with diversified revenue streams across different geographies, including Crompton Greaves and KEC International.
Investors are also positive on Larsen and Toubro as the company's order book is better placed compared to other capital goods companies. Investors have negative bias on stocks of Cummins India and Siemens due to weak earnings. Siemens posted a net loss of 488.27 mln rupees for Apr-Jun, compared with a profit of 361.98 mln rupees a year ago. It also cut down its estimates for revenues, costs and project-related provision.
Most stocks of capital goods companies are seen trading down, as delay in projects, higher expenditure, and margin pressure continue to hurt the companies' profitability. Projects are delayed as clients are going slow on capex (capital expenditure), payments are deferred, which has led to delay in booking revenues, even as expenditure continues, resulting in margin pressure and deterioration of working capital New project announcements have further dried up, which points towards subdued industrial and capital expenditure activity in the coming quarters also, affecting order inflow for capital goods companies. Headwinds in the power sector have limited order visibility further for companies, especially from private utilities.
The investors expect some order inflow from the state and central Utilities. However, they feel finalisation of these orders is likely to be delayed due to various factors including fuel crisis, constraints in land acquisition, and poor health of state electricity boards. Overall, the outlook remains challenging in the short-term. Government measures to fast-track projects and framing of restructuring policies for state electricity boards to improve their financial condition is a long-term positive. The preferred stocks for investors for the week are the companies with diversified revenue streams across different geographies, including Crompton Greaves and KEC International.
Investors are also positive on Larsen and Toubro as the company's order book is better placed compared to other capital goods companies. Investors have negative bias on stocks of Cummins India and Siemens due to weak earnings. Siemens posted a net loss of 488.27 mln rupees for Apr-Jun, compared with a profit of 361.98 mln rupees a year ago. It also cut down its estimates for revenues, costs and project-related provision.
