Capital Goods Stocks
Outlook for the week – 15 to 18.11.2016
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Stocks of capital goods companies are expected to witness a
correction in the upcoming truncated
week, in line with the dull broader market and as data
released today showed dismal growth for the
sector in September. Capital goods, a proxy for investment
demand in the economy, contracted for
the eleventh straight month in September, declining 21.6% as
against a 22.1% fall a month ago,
according to data released by the Central Statistics Office.
The sector's growth was 10.1% in the
corresponding month a year ago.
However, some stock-specific action next week, especially
for Crompton Greaves and Bharat Heavy
Electricals. Stocks of Crompton Greaves could rise to 95
rupees in the near term, after the company
announced it has a received a binding offer for sale of its
global automation business from a Saudi
Arabian company at an enterprise value of 120 mln euros. The
acquisition, likely to be completed by
Jan 31, is aimed at meeting Crompton Greaves' targets in
terms of debt reduction.
State-owned Bharat Heavy Electricals could see some upside
next week as the company, in a postearnings
statement, said its focus on execution of projects and order
inflow is expected to remain
strong. For Jul-Sep, the company reported a net profit of
1.09 bln rupees as against a loss of 1.81 bln
rupees in the year-ago period, primarily due to higher sales
and better operating performance
during the quarter. Net sales for the quarter rose 12.1% on
year to 65.51 bln rupees.
