Capital Goods Stocks Outlook for the week – 26 to 30.10.2015
Seen
weak, Jul-Sep earnings eyed
( www.rupeedesk.in )
Stocks
of capital goods companies are seen continuing to trade with a negative bias
next
week
as Jul-Sep corporate earnings of companies in the sector are seen dull. Energy
and
environment
equipment maker Thermax will report Jul-Sep earnings on Tuesday, while
electrical
products maker Crompton Greaves will detail its results on Thursday. Sector
major
Larsen & Toubro and state-owned Bharat Electronics will report their
earnings On
Oct
30. Three of these four companies are seen reporting a decline in net profit.
Sluggish
domestic orders in power, metallurgical and heavy equipment space is also seen
resulting
in a fall in order booking for them in Jul-Sep. Crompton Greaves is seen
reporting
consolidated net profit of 472 mln rupees, down 28% on year and net sales of
33.47
bln rupees, down 3% on year.
L&T
too is also expected to report a decline in Jul-Sep consolidated net profit and
report
a
second consecutive quarter of decline in order inflows. In Apr-Jun, the company
reported
a 21% decline in order inflows in contrast to its aim to achieve 15% growth in
order
inflows in 2015-16 (Apr-Mar). If the sector bellwether L&T reports subdued
order
inflows
for Jul-Sep, it may have a negative impact on the shares of other companies in
the
sector.
The
government has released the draft of capital goods policy yesterday. Though the
policy
seeks to provide export incentives and norms regarding localisation of
equipment
within
the world trade organisation framework, we do not see the development having
any
near-term impact on the prevailing negative sentiment in the sector. Further,
post the
Indian
market hours yesterday, China announced it had cut its one-year lending rate
and
one-year
deposit rate by 25 basis points. This may add competitive pressure in heavy
equipment
segment and further lend a blow to shares of Indian capital goods companies
next
week.