Capital Goods Stocks Outlook for the week – 20 to 22.10.2014
( www.rupeedesk.in )
Stocks
of capital goods companies are seen in range next week on the back of
sector-specific
triggers and overall weak volumes due to the short trading week.
Benchmark
share indices are expected to move in a narrow range later next week
as
investors avoid taking positions ahead of a long weekend. However, stocks of
major
capital goods companies such as Bharat Heavy Electricals and Larsen &
Toubro
may find favour among long term investors as the stocks of the company
are
currently attractive.
L&T
is exposed to several levers across business/geographic segments and has
emerged
as the E&C (engineering and construction) partner of choice in India,
which
provides a robust foundation to capitalise on the next leg of investment
cycle.
With
the government focused on reviving stalled projects, state-owned power
equipment
maker BHEL is also seen benefiting from the optimism of long term
investors
in the capital goods sector.
BHEL
has significant scope for reduction in material costs, thereby improving gross
margins.
Savings in material costs and better operating leverage will help improve
EBITDA
margin to 12.9% and 15.7% in FY16e and FY17e, respectively, from 11.6% in
FY14.
