Capital Goods Stocks Outlook for the week – 24 to 28.10.2016 (Seen down; Cummins India in focus)

Capital Goods Stocks Outlook for the week – 24 to 28.10.2016

(Seen down; Cummins India in focus)

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The shares of capital goods companies are likely to be down, due to the absence of

significant triggers and an overall weak outlook on business prospects of sector majors.

There is likely to be some stock-specific action next week, after the government today

said it is mulling a scheme to encourage domestic manufacturing and adoption of new

technologies in the sector.

There are by and large no major cues to look forward to in the short term. State-owned

Bharat Heavy Electricals could see minor gains as an order from the Tamil Nadu

Generation and Distribution Corp is expected to be the second-largest for the company,

at 78 bln rupees.

The scrip could rise to 150 rupees in the near-term. Shares of Larsen & Toubro could

see a slight rise to 1,520 rupees in the coming week, following an order by the Inland

Waterways Authority of India to build a multi-modal terminal at Sahibganj in

Jharkhand. The terminal is part of the 42-bln-rupee Jal Marg Vikas project to develop

National Waterway-1. Market participants will also keep an eye on Cummins India as it

will detail its Jul-Sep earnings on Wednesday.

Capital Goods Stocks Outlook for the week – 17 to 21.10.2016

Capital Goods Stocks Outlook for the week – 17 to 21.10.2016

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Weak industrial production data for August and the absence of significant triggers are likely

to keep shares of capital goods companies in a range next week, with a negative bias.

India's industrial production contracted 0.7% on year in August, compared with 2.5%

contraction in July. Production of capital goods fell 22.2% in August, against 29.5% in July.

This was the 10th consecutive month that the capital goods sector, considered a proxy for

investment demand in the economy, contracted.

State-owned Bharat Heavy Electricals is likely to be in focus next week, as the company's

project execution is expected to pick up. it was optimistic, because three of its major power

projects, worth a combined 300 bln rupees, could be fast-tracked after securing the

necessary clearance. For a company of 1-trln-rupee order backlog, this is materially

Significant.

Stock of Larsen & Toubro could see a slight upside to 1,490 rupees in the coming week

following a 37.99-bln-rupee order win from the Dedicated Freight Corridor Corp of India. The

order was bagged by L&T Construction, owned by L&T.

Capital Goods Stocks Outlook for the week for the week – 03 to 07.10.2016 May see more correction; Thermax eyed

Capital Goods Stocks Outlook for the week for the week – 03 to 07.10.2016

May see more correction; Thermax eyed

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Stocks of capital goods companies are likely to see more correction in the upcoming week in the

absence of significant triggers, apart from the Reserve Bank of India's monetary policy. Major capital

goods stocks have fallen 1.7-7.8% this week, seeing sharp declines on Thursday after India said it

had conducted surgical strikes on terror launch pads along the Line of Control. However, concerns

regarding geopolitical tensions with Pakistan are expected to lessen next week. The RBI will detail its

monetary policy on Tuesday at 1430 IST. This will be Governor Urjit Patel's policy debut, where the

central bank is expected to leave interest rates unchanged. Stocks of Larsen & Toubro are likely to be

range-bound with minor gains, as the sector bellwether won orders worth 20.46 bln rupees across

various business segments this week. State-owned Bharat Heavy Electricals is likely to fall more in

the forthcoming week after closing nearly 8% lower this week, touching a one-month low of 129.60

rupees on Thursday.

Capital Goods Stocks Outlook for the week – 19 to 23.09.2016 Seen range bound; Cummins India in focus

Capital Goods Stocks Outlook for the week – 19 to 23.09.2016

Seen range bound; Cummins India in focus

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Capital goods stocks are expected to trade within a range with largely a negative bias next week, in

the absence of significant triggers and a continued bleak outlook on the sector. So far in 2016-17

(Apr-Mar), capacity utilisation of industries has been lower than 2015-16, and hence, the capital

goods segment might not do that well in the near to medium-term.

Stocks of sector bellwether Larsen & Toubro might see a slight upside in the upcoming week with the

initial public offering of its subsidiary L&T Technology Services getting subscribed 2.5 times on the

final day. The company received bids for 18.4 mln shares against 7.28 mln shares on offer.

Analysts have maintained a dull outlook on state-owned Bharat Heavy Electricals on the back of likely weak operating margins, due to pricing pressure in the coming quarters. Cummins India could see buying in the short-term, as the company is "well-placed" to take advantage of the government's

increased emphasis on roads and railways.

Capital Goods Stocks Outlook – 06 to 09.09.2016 Seen range bound, bias negative

Capital Goods Stocks Outlook – 06 to 09.09.2016

Seen range bound, bias negative

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In the forthcoming week, stocks of capital goods companies are likely to trade within a range with a

negative bias in the absence of near-term triggers, and recent rating downgrades on a couple of

companies in the sector. Sector bellwether Larsen & Toubro may see some stock-specific action next

week, with L&T Technology Services Ltd--its wholly-owned subsidiary--set for an initial public

offering, which opens for subscription on Sep 12. The offer will close on Sep 15. The company has

set the price band for its 10.40-mln-share initial public offer at 850-860 rupees a share.

UDAY (Ujwal DISCOM Assurance Yojana) led benefits are now expected to be long drawn. Also

margin profile will remain lumpy given sale of various businesses and related costs. Crompton

Greaves' recent run-up caps near-term upsides. However, analyst said he was optimistic about the

Avantha Group Company’s industrial growth in the short term, owing to its favourable positioning in

low-tension/high-tension motors. State-owned Bharat Heavy Electricals is unlikely to gain much next

week.

Capital Goods Stocks Outlook for the week – 29.08.2016 to 02.09.2016 (Seen to trade in range, bias negative)

Capital Goods Stocks Outlook for the week – 29.08.2016 to 02.09.2016

(Seen to trade in range, bias negative)

Stocks of capital goods companies are expected to trade in a range with a negative bias

next week in the absence of major triggers and a weak outlook for the sector in the nearterm.

Sector bellwether Larsen & Toubro may see some upside in the coming week,

following Group Executive Chairman A. M. Naik's comments that the company has set

a sales target of 2 trln rupees by 2021 without compromising on margins. Stocks of

Crompton Greaves are likely to trade sideways with the business not picking up much

in the recent times.

Capital Goods Stocks Outlook for the week – 08 to 12.08.2016 In a range with negative bias next week

Capital Goods Stocks Outlook for the week – 08 to 12.08.2016

In a range with negative bias next week

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Stocks of capital goods companies are expected to trade within a range with a negative bias next

week owing to weak Apr-Jun earnings and bleak outlook on sector majors. Sector bellwether Larsen

& Toubro could see a near-11% fall from current levels in the next few weeks. Stocks of Cummins

India and Siemens may not see an upside in the forthcoming week, owing to lower than expected net

profit for the quarter ended June. Cummins India reported a 14.3% on-year fall in net profit at 1.8

bln rupees and a 4% on-year fall in net sales at 12.3 bln rupees in Apr-Jun. Siemens' net profit

declined 22.7% on year to 1.30 bln rupees in the June quarter, while net sales were up 10.4% yearon-

year at 25.63 bln rupees. Analysts had estimated the engineering company's net profit at 1.68 bln

rupees, same as that a year ago.

Capital Goods Stocks Outlook for the seek – 01 to 05.08.2016 (Seen in range; Apr-Jun earnings eyed)

Capital Goods Stocks Outlook for the seek – 01 to 05.08.2016

(Seen in range; Apr-Jun earnings eyed)

 ( www.rupeedesk.in )

Next week, shares of capital goods companies are likely to trade within a range and on a cautious note, as Siemens and Cummins India detail their earnings for Apr-Jun. The Stock-specific action is

expected, owing to no notable near-term triggers apart from the earnings announcements of companies.

Sector bellwether Larsen & Toubro yesterday reported a 45.5% on-year rise in consolidated net profit

for Apr-Jun at 6.10 bln rupees, while its consolidated total income increased 9.1% on year to 218.74

bln rupees. However, both the bottomline and topline were below the estimated 7.94 bln rupees and

224.48 bln rupees, respectively.

The stock could hit 1,580 rupees next week, as L&T has maintained its sales growth forecast at 12-

15%, and order inflow growth forecast at 15% for 2016-17 (Apr-Mar). Market participants will track

Siemens and Cummins India, as both will announce their earnings for the June quarter on Aug 4.

Cummins India is expected to perform well over the medium-to-long term, as business fundamentals

remain strong. The stock could rise to 890 rupees in the coming week, it added. Siemens is likely to

report a net profit of 1.7 bln rupees for Apr-Jun, almost flat on year, and a 9.1% on-year rise in net

sales at 25.32 bln rupees

Capital Goods Stocks Outlook for the week – 18 to 22.07.2016 (Seen in range in absence of triggers)

Capital Goods Stocks Outlook for the week – 18 to 22.07.2016

(Seen in range in absence of triggers)

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Stocks of most capital goods companies are likely to trade within a range next week, in the absence of major cues in the short term, apart from the announcement of corporate earnings for Apr-Jun. The

Apr-Jun earnings of major companies are lined up for the last week of July and early August. This

apart, there might be some stock-specific movement with respect to Larsen & Toubro and Crompton

Greaves.

Close on the heels of the 17.5-mln-share initial public offering of L&T Infotech, engineering major

Larsen & Toubro said it will sell 15% stake in subsidiary L&T Technology Services, in an initial

public offering reportedly worth 7.5-10.0 bln rupees. Stocks of L&T hit a six-month high of 1,595.00

rupees on the news, and could rise above 1,620 rupees in the next few weeks.

With Crompton Greaves halting operations at its Mandideep manufacturing plant in Madhya Pradesh

following torrential rains, stocks of the company are seen under pressure next week. The trend in the

stock is weak and it may fall to 68 rupees in the near term. The management is confident that

normalcy in operations will be restored in a short time," the Avantha Group-owned company said in a

release.

In the coming week, shares of state-owned Bharat Heavy Electricals are likely to be weighed by a

slower recovery in execution, an improved order outlook notwithstanding.

Capital Goods Stocks Outlook for the week – 11 to 15.07.2016

Capital Goods Stocks Outlook for the week – 11 to 15.07.2016

(Seen trade with range-bound as earning issue)

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Next week, stocks of capital goods companies are expected to trade in a range and on a cautious note,

as announcement of corporate earnings for Apr-Jun begins, and in the absence of any other major

trigger.

All eyes will be on management commentary and the outlook on key issues, as companies start

detailing their June quarter earnings in the second half of July. Not much upside is seen in the stocks

of major capital goods companies in the coming week.

Sector bellwether Larsen & Toubro is seen positive in the near term, with news of subsidiary L&T

Infotech's initial public offering on Jul 11 almost factored in by the market.

Stocks of state-owned Bharat Heavy Electricals Ltd might see a downside, after JP Morgan said there

was "high probability" that the company would see its order inflow fall in 2016-17 (Apr-Mar). In the

last six sessions, the stock has risen more than 19%, before hitting a three-month high of 141.95

rupees.

Capital Goods Stocks Outlook for the week – 04to 08.07.2016 (Seen range-bound with a positive bias)

Capital Goods Stocks Outlook for the week – 04to 08.07.2016

(Seen range-bound with a positive bias)

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The stock of capital goods companies are expected to trade range-bound with a positive bias next

week, with the announcement of companies earnings for Apr-Jun nearing, and the impact of Brexit

largely factored in. Most capital goods companies will detail their Apr-Jun earnings in the second half of July, and management commentary would be a key trigger in the near term. The fallout of Brexit has mostly been factored in, as far the wider market is concerned. Sector major Larsen & Toubro is likely to gain next week, with the announcement of its subsidiary Larsen & Toubro InfoTech’s initial public offering. The offer will be open for subscription during Jul 11-13.

This week, the stock surged over 7%, tracking the broader market. In the next few weeks, it could test the 1,600-rupee level, another technical Crompton Greaves is seen positive in the short term, with an upside target of 85-90 rupees a share, riding on the Avantha Group-owned company's recent announcement of selling its global automation business, ZIV, by September. the management of

Crompton Greaves gave strong growth guidance for the industrial vertical, which would push the stock higher. Shares of state-owned Bharat Heavy Electricals Ltd are expected to continue the uptrend and rise to 140 rupees in the short term. The stock has risen nearly 11% in the last three sessions, primarily because it was undervalued.

Capital Goods Stocks Outlook for the week – 27.06.2016 to 01.07.2016, Seen in range with negative bias

Capital Goods Stocks Outlook for the week – 27.06.2016 to 01.07.2016, Seen in range with negative bias

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Stocks of capital goods companies are expected to trade in a range with a negative bias next week,

tracking the broad market for further cues in the aftermath of the Brexit that sent markets worldwide

in a tailspin yesterday. Indian financial markets reacted sharply to the surprise result of the UK

referendum, with the BSE Sensex falling over 1000 points, or 4%, and rupee declining to 68.21 a

dollar, the lowest level in four months.

Nifty 50 ended down 181.85 points or 2.2% at 8088.60, after touching an intraday low of 7927.05

points. Stocks of major capital goods companies were down after the UK voted in favour of leaving

the European Union, as traders pulled funds out of equities, owing to uncertainty across the wider

market. While capital goods and engineering sectors are largely a domestic story, the tone for the

broad market will be dictated by foreign institutional flows. If investment sentiment remains subdued

across the wider market, stocks in this sector will feel the headwinds as well. Avantha Group-owned

Crompton Greaves, too, fell 1.5% following the referendum, while stocks of state-owned Bharat

Heavy Electricals and Siemens were down 3.3% and 2.2%, respectively. Stock of Siemens is seen

trading with a weak bias.

Capital Goods Stocks Outlook for the Week – 20 to 24.06.2016 Trading seen stock-specific next week

Capital Goods Stocks Outlook for the Week – 20 to 24.06.2016

Trading seen stock-specific next week

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Trading in stocks of capital goods is likely to remain stock-specific next week due to lack of sectorwide triggers. However, towards the end of next week, the Brexit referendum may have impact on the broader market, which would have a spillover effect across various sectors. Stocks of Larsen & Toubro are likely to stay firm and inch upwards during the next couple of weeks as any slight weakness in the stock is seen as an opportunity to invest. Crompton Greaves too is seen gaining in the next few weeks. The management of the company at a recent meeting with analysts gave a strong growth guidance in the industrial vertical and a possible sale of ZIV business. ZIV's topline in 2015-16 was 110 mln euros (around 8.30 bln rupees) but reported an operating loss. In our view, the possible sale of ZIV is likely to be a key positive for the CRG (Crompton Greaves) stock. Investors are, however, bearish on shares of state-owned Bharat Heavy Electricals and the stock is expected to extend losses.

Capital Goods Stocks Outlook for the week – 13 to 17.06.2016 (Down on weak IIP data; L&T may gain)

Capital Goods Stocks Outlook for the week – 13 to 17.06.2016

(Down on weak IIP data; L&T may gain)

( www.rupeedesk.in )

Shares of capital goods companies, except Larsen & Toubro Ltd, are largely expected to trade with a weak bias next week owing to negative sentiment on account of disappointing industrial output data. After market hours yesterday, the Central Statistics Office announced that the industrial output for April contracted 0.8% as against a growth of 3.0% a year ago, primarily on account of a sharp decline in the manufacturing and capital goods segments.

Output in the manufacturing sector, which accounts for three-fourths of the Index of Industrial Production, contracted 3.1% in April, compared with growth of 3.9% a year ago. Output in the capital goods segment, an indicator of investment and demand in the economy, contracted a whopping 24.9% in April, against growth of 5.5% a year ago.

Industrial capex activity could be a few quarters away, as capacity utilization for most companies a function of demand improvement remains weak. Bharat Heavy Electricals Ltd is seen extending losses next week and the stock may hit a low of 115 rupees. The downward trend in shares of the state owned company is likely to continue and critical support for the stock is seen at 102 rupees.

Shares of Larsen & Toubro are expected to remain strong as the company has strong

order inflows and project execution in the construction segment which will likely offset headwinds from exposure to the capital goods sector.

Capital Goods Stocks Outlook for the week – 23 to 27.05.2016 (Trade seen stock-specific; results key)

Capital Goods Stocks Outlook for the week – 23 to 27.05.2016

(Trade seen stock-specific; results key)

 ( www.rupeedesk.in )

The shares of capital goods companies is seen stock-specific next week as most major companies in the sector will detail their Jan-Mar earnings during the week. Sector bellwether Larsen & Toubro will detail its earnings for the March quarter on Wednesday, as will midcap majors Thermax and engines and generator manufacturer Cummins India.

VA Tech Wabag will detail its earnings on Thursday, while state-owned BEML and Bharat Electronics, and Avantha group's Crompton Greaves will announce their results on Friday. Investors will be eyeing comments from L&T's management on the outlook for the heavy engineering sector. The company's own performance in terms of bottomline and operating margin has been impacted by its shrinking capital goods order book as well as rising cost of underutilised assets.

In the nine months ended December, the company's operating margin for the heavy engineering segment fell to (-)2.2% from 11.9% in the corresponding period a year ago. Revenue from the segment fell 14% on year to 20.9 bln rupees in Apr-Dec.

Similarly, power equipment maker Thermax is also reeling from the effects of a depleting order book. The company is expected to report a nearly 9% on-year fall in topline at 13.66 bln rupees in Jan-Mar, and a 17% decline in net profit at 1.10 bln rupees

Capital Goods Stocks Outlook for the week – 09 to 13.05.2016 Trade to be stock-specific; results key

Capital Goods Stocks Outlook for the week – 09 to 13.05.2016

Trade to be stock-specific; results key

 ( www.rupeedesk.in )

Trading in stocks of capital goods is likely to be stock-specific next week with tracking of the Jan-Mar earnings of companies in the sector. However, macro economic data--industrial production and

inflation data--to be released during the week may trigger some sector-wide trend. The industrial

production data for March will be detailed on Thursday by the Central Statistics Office. The sector's

industrial growth was (-) 9.8% in February as compared to 8.3% year ago. Stocks of engineering

major Siemens Ltd will be in focus on Monday as the company reported its Jan-Mar earnings post

market hours yesterday.

It reported a 9.6% on year-on-year increase in Jan-Mar net profit to 1.77 bln rupees and an increase of 5.3% on year in net sales to 27.25 bln rupees. The positive surprise did not just end with the bottom line growth as Siemens also exceeded on the operating margin front, posting a 155-basis point increase to 11% in Jan-Mar. Siemens order inflows in Jan-Mar rose 10.5% to 29.39 bln rupees, which bodes well not just for the company but also the broader sector. With the earnings springing a positive surprise. Triveni Turbines, a mid-cap capital goods player, will report its earnings on Tuesday. The company is seen reporting net profit of 349 mln rupees, up 19% year-on-year, and net sales of 2.42 bln rupees, up 26%.

Capital Goods Stocks Outlook for the week – 02 to 06.05.2016 Seen in range; Siemens earnings eyed

Capital Goods Stocks Outlook for the week – 02 to 06.05.2016

Seen in range; Siemens earnings eyed

 ( www.rupeedesk.in )

Stocks of capital goods companies are seen range bound, tracking the wider market and in the

absence of any sector-specific triggers. The Jan-Mar earnings season for the sector has started on a

negative note with ABB India reporting earnings below market view. Moreover, the engineering

company's order inflows remained tepid for the quarter and margins too came much below analysts'

estimates. While the management of the company is upbeat about future prospects in India, higher

valuations saw the company's share prices corrected. Stocks of the company have fallen 2.99% in

the last five trading sessions. Given the higher other expense and lower than expected growth, we

cut our earnings by 16% and 10% for CY16e (calendar year 2016) and CY17e (calendar year (2017).

Next week, Siemens Ltd will report its Jan-Mar earnings on May 6. The capital goods and engineering major is seen reporting net profit of 1.59 bln rupees, down 1.6% on year, and net sales of 27.57 bln rupees, up 6.5% on year. We expect flat to 7-8% revenue growth on the back of improved traction in product business.

Capital Goods Stocks Outlook for the week – 18 to 22.04.2016

Capital Goods Stocks Outlook for the week – 18 to 22.04.2016

 ( www.rupeedesk.in )

Stocks of most capital goods companies are seen trading with a negative bias next week, ahead of what is being viewed as another quarter of weak earnings.

In the near term, stocks of product companies such as Voltas, Blue Star, and Cummins are seen outperforming its peers in the project business. Not only are project companies

such as Larsen & Toubro, Bharat Heavy Electricals, and Thermax likely to experience

execution challenges and report a decline in the topline, order inflows are expected to

remain tepid in two further quarters. Since capital misallocation takes time to unwind, we see continued pressure on L&T over the near-to-medium term.

Capital Goods Stocks Outlook for the week – 11 to 15.04.2016 (Seen rangebound with weak bias next week)

Capital Goods Stocks Outlook for the week – 11 to 15.04.2016

(Seen rangebound with weak bias next week)

( www.rupeedesk.in )

Shares of capital goods companies are seen trading in range with a weak bias next week, as investors are likely to remain cautious ahead of what is largely expected to be another weak earnings quarter for the sector.

In the near-term, capital goods companies are seen weakening and investors may choose to wait before taking new positions. Sector major Larsen and Toubro Ltd is expected to miss its twice-revised order inflow guidance of achieving 5-7% consolidated order inflow growth.

So far, the company has announced orders worth 163.4 bln rupees to the exchanges. To

meet the order inflow guidance, it needs to get orders worth 650 bln rupees, excluding

information service contracts. However, shares of state owned Bharat Heavy Electricals

Ltd, which had been moving along a weak trajectory in recent weeks, found some relief

during this week after the company reported a provisional net profit of 3.96 bln rupees

for Jan-Mar, following two consecutive quarters of losses.

Capital Goods Stocks Outlook for the week – 04 to 08.04.2016 RBI policy Tue to dictate trajectory

Capital Goods Stocks Outlook for the week – 04 to 08.04.2016

RBI policy Tue to dictate trajectory

 ( www.rupeedesk.in )

The Reserve Bank of India's first bi-monthly monetary policy for 2016-17 (Apr-Mar) to be announced on Tuesday is likely to dictate movement of capital goods stocks next week. Most market participants are hoping for a 25-basis-point repo rate cut by the RBI. Although this has largely been factored in, the announcement is likely boost the sentiment and lead to some gains for indices.

In case the central bank keeps rates unchanged, it will impact capital goods stocks negatively. Ahead

of the policy announcement, the stocks are seen getting a positive push from the 5.7% output growth

in core sectors in February, data for which was released on Thursday.

Among the stocks, technical analysts' favoured are Larsen and Toubro Ltd and Siemens Ltd. One can

go long on these stocks. Larsen & Toubro has announced orders worth 163.4 bln rupees in Jan-Mar till date. The company has given a guidance of 5-7% on-year growth in order inflow, and has garnered 935.2-bln-rupee order inflows in Apr-Dec. State-owned Bharat Heavy Electricals Ltd's stock may move in anticipation of the Jan-Mar results, which will be announced on Thursday.