The capital goods sector is comfortably positioned, supported by strong order book providing healthy revenue visibility, favorable commodity prices offering comfort to margins, strong balance sheet that provides leeway for capex, and favorable government policies, such as plans for emergency defense procurement, focus on renewables, and Make in India initiative.
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Motilal Oswal Report
The Capital goods sector has already seen outperformance during the quarter on decent results and expectations of capex revival. We expect these valuations to be sustained only on continuity of order inflows as well as earnings momentum.
Broadly, capex activity from private sector continues to remain weak. Along with this, defense sector has seen a re-rating on hopes of emergency procurement as well as on NATO’s new spending targets on defense and expectations that India would follow the suit.
We expect these to be positive for defense sector as it widens the total addressable market on both domestic and international markets for defense companies.
Valuations for transmission sector plays would continue to remain high on continuously improving market opportunities on T&D and renewable.
Our top picks
We prefer companies with a well-balanced revenue mix, control over margins, and the ability to maintain or improve growth profile going forward. We remain selective on the sector and maintain our positive stance on L&T, Cummins, and Bharat Electronics in the large cap space and Kirloskar Oil Engines and Kalpataru Projects International in the mid- and small-cap segments.
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. Read more on Research Reports by NDTV Profit.Motilal Oswal reiterates positive stance on L&T, Cummins, and Bharat Electronics in the large cap space and Kirloaskar Oil and Kalpataru Projects in the mid- and small-cap segments. Read MoreResearch Reports
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