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Stocks of capital goods companies are largely seen up next week as investors may pick up stocks of companies such as Larsen & Toubro and Crompton Greaves because they expect these companies to gain from their exposure to international market in the short term. Crompton Greaves has a strong overseas operation, which is likely to offset the weak domestic performance in the near to medium term. Our analysis of trends from the international peer group for Crompton Greaves suggests that the worst might be over as far as growth and pricing pressure in the power T&D (transmission and distribution) sector is concerned.
We note that this is probably the right time to look at CRG's (Crompton Greaves) international portfolio more constructively. L&T is also placed well in its international order flow space. The company expects international orders to pick up from 149.66 bln rupees in 2012-13 (Apr-Mar) to 250.00 bln rupees in 2013-14 (Apr-Mar). The company's total order inflow at the end of the current financial year is expected to be at 990.00 bln rupees. Investors are confident of the company achieving its growth target of about 15% in revenue and 20% in order inflow for the current financial year, given its robust order backlog, healthy order inflows and strong execution capabilities.
Investors are also positive on L&T's plans to raise funds through dilution of stake in L&T Infrastructure Development Projects and to monetise existing non-core assets such as Dharma port. We believe this would help the company fund its equity requirement. It is also best placed to benefit from a gradual recovery in the capex (capital expenditure) cycle given its diverse exposure to sectors and a strong balance sheet. Stocks of Bharat Heavy Electricals Ltd, which has seen significant run-up in the last one month, will move in a narrow range, as the stocks are already trading near the resistance level. Investors are of the view that the company valuations are unjustified given deterioration in operating metrics. In the second half, BHEL's margins are will remain under pressure as execution issues with some clients persist. Stocks of the company have rallied in the recent past after new power projects were announced by the government, making it mandatory for the plant developers to source domestic equipments. However, the scope for the company to benefit from it anytime soon is unlikely. The domestic market has still not recovered, which will keep its order flow level low.
Stocks of capital goods companies are largely seen up next week as investors may pick up stocks of companies such as Larsen & Toubro and Crompton Greaves because they expect these companies to gain from their exposure to international market in the short term. Crompton Greaves has a strong overseas operation, which is likely to offset the weak domestic performance in the near to medium term. Our analysis of trends from the international peer group for Crompton Greaves suggests that the worst might be over as far as growth and pricing pressure in the power T&D (transmission and distribution) sector is concerned.
We note that this is probably the right time to look at CRG's (Crompton Greaves) international portfolio more constructively. L&T is also placed well in its international order flow space. The company expects international orders to pick up from 149.66 bln rupees in 2012-13 (Apr-Mar) to 250.00 bln rupees in 2013-14 (Apr-Mar). The company's total order inflow at the end of the current financial year is expected to be at 990.00 bln rupees. Investors are confident of the company achieving its growth target of about 15% in revenue and 20% in order inflow for the current financial year, given its robust order backlog, healthy order inflows and strong execution capabilities.
Investors are also positive on L&T's plans to raise funds through dilution of stake in L&T Infrastructure Development Projects and to monetise existing non-core assets such as Dharma port. We believe this would help the company fund its equity requirement. It is also best placed to benefit from a gradual recovery in the capex (capital expenditure) cycle given its diverse exposure to sectors and a strong balance sheet. Stocks of Bharat Heavy Electricals Ltd, which has seen significant run-up in the last one month, will move in a narrow range, as the stocks are already trading near the resistance level. Investors are of the view that the company valuations are unjustified given deterioration in operating metrics. In the second half, BHEL's margins are will remain under pressure as execution issues with some clients persist. Stocks of the company have rallied in the recent past after new power projects were announced by the government, making it mandatory for the plant developers to source domestic equipments. However, the scope for the company to benefit from it anytime soon is unlikely. The domestic market has still not recovered, which will keep its order flow level low.
