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Stocks of capital goods companies are seen trading marginally higher this week, as nearly bottomed-out prices of stocks in this sector may trigger value-buying. Investors are likely to favour stocks of diversified players such as Larsen & Toubro. The company appears to us to be best-positioned to capitalize on a revival in the capex cycle, and we forecast it to see 1.01 trln rupees worth of new orders in FY14 up 15% year on year driven by the railways, power, and oil and gas sectors. Rating on L&T as it has a strong order backlog of 1.65trln rupees, which should enable solid execution, and as we forecast revenue growth of 13% per annum and profit after tax growth of 9.5% per annum over FY13-16.
Stocks of companies that are power equipment makers such as Bharat Heavy Electricals, ABB and Siemens may remain rangebound, taking cues from the larger market. With the power sector facing structural headwinds, we see a limited order pipeline for BHEL (15GW over the next 12-18 months, from state and central utilities), and expect the competition from domestic suppliers to remain fierce. Investors are also positive on engines and generator maker Cummins India, on market talks that the parent company Cummins Inc may announce a buyback for shares of its Indian arm.
Stocks of capital goods companies are seen trading marginally higher this week, as nearly bottomed-out prices of stocks in this sector may trigger value-buying. Investors are likely to favour stocks of diversified players such as Larsen & Toubro. The company appears to us to be best-positioned to capitalize on a revival in the capex cycle, and we forecast it to see 1.01 trln rupees worth of new orders in FY14 up 15% year on year driven by the railways, power, and oil and gas sectors. Rating on L&T as it has a strong order backlog of 1.65trln rupees, which should enable solid execution, and as we forecast revenue growth of 13% per annum and profit after tax growth of 9.5% per annum over FY13-16.
Stocks of companies that are power equipment makers such as Bharat Heavy Electricals, ABB and Siemens may remain rangebound, taking cues from the larger market. With the power sector facing structural headwinds, we see a limited order pipeline for BHEL (15GW over the next 12-18 months, from state and central utilities), and expect the competition from domestic suppliers to remain fierce. Investors are also positive on engines and generator maker Cummins India, on market talks that the parent company Cummins Inc may announce a buyback for shares of its Indian arm.
