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Stocks of most capital goods and engineering companies are seen trading with a negative bias next week due to the weak sentiment prevailing post a disappointing Jul-Sep earnings seasons. With no significant improvement in seen in domestic demand or order flow in the short-term, analysts favour stocks of companies, which have higher exposure to international orders. There are still no signs of pick in domestic private sector capex while government sector spending remains sluggish--especially in power sector. We favour stocks such as Larsen & Toubro, KEC International, Kalpaturu Power Transmission, who derive a significant portion of their revenues from International markets. Despite energy and environment engineering solutions maker Thermax, which announced its Jul-Sep results on Wednesday, maintaining its operating margin in Jul-Sep, downgraded the shares of the company due to to lower order visibility.
Thermax's conservative approach and judicious selection of projects has helped it stay afloat with regard to the overall balance sheet quality and profitability versus peers. However, we believe sustaining growth issues in power equipment market led by weak investment outlook for power utilities and captive power would limit growth potential over the next 1-2 years and thereby limit Thermax's capability on earnings. Electrical equipment maker Crompton Greaves yesterday posted its Jul-Sep results, post market hours. While the company has sizeable business overseas, the performance of these operations, in Jul-Sep, was impacted due to the cost pressures arising from restructuring of the company's international business. The company posted consolidated posted Jul-Sep consolidated net profit of 584.1 mln rupees, nearly 38.9% higher on year and net sales for the quarter under review also rose 9.6% on year to 32.05 bln rupees.
Stocks of most capital goods and engineering companies are seen trading with a negative bias next week due to the weak sentiment prevailing post a disappointing Jul-Sep earnings seasons. With no significant improvement in seen in domestic demand or order flow in the short-term, analysts favour stocks of companies, which have higher exposure to international orders. There are still no signs of pick in domestic private sector capex while government sector spending remains sluggish--especially in power sector. We favour stocks such as Larsen & Toubro, KEC International, Kalpaturu Power Transmission, who derive a significant portion of their revenues from International markets. Despite energy and environment engineering solutions maker Thermax, which announced its Jul-Sep results on Wednesday, maintaining its operating margin in Jul-Sep, downgraded the shares of the company due to to lower order visibility.
Thermax's conservative approach and judicious selection of projects has helped it stay afloat with regard to the overall balance sheet quality and profitability versus peers. However, we believe sustaining growth issues in power equipment market led by weak investment outlook for power utilities and captive power would limit growth potential over the next 1-2 years and thereby limit Thermax's capability on earnings. Electrical equipment maker Crompton Greaves yesterday posted its Jul-Sep results, post market hours. While the company has sizeable business overseas, the performance of these operations, in Jul-Sep, was impacted due to the cost pressures arising from restructuring of the company's international business. The company posted consolidated posted Jul-Sep consolidated net profit of 584.1 mln rupees, nearly 38.9% higher on year and net sales for the quarter under review also rose 9.6% on year to 32.05 bln rupees.
