Order inflows remain robust
PL Capital said order inflows are expected to remain strong across power T&D, buildings and factories, hydrocarbons, energy transition, metals, data centres and infrastructure. In Q2FY27, L&T reported order inflows of about Rs 1.4 lakh crore, led by three ultra-mega hydrocarbon orders from the Middle East.
KEC International and Kalpataru Projects International reported order inflows of about Rs 3,600 crore and Rs 9,500 crore, respectively, across domestic and export markets. These were mainly in power T&D, buildings and factories, oil and gas, and residential projects.
Defence order activity was relatively subdued, with Bharat Electronics reporting Q2FY27 order inflows of about Rs 3,340 crore across optics, radar, fuzes and avionics. Even so, PL Capital said the medium-term defence pipeline remains healthy, supported by Defence Acquisition Council (DAC) approvals worth about Rs 1.6 lakh crore so far in FY27 and rising private-sector participation in missile production.
T&D and machinery lead growth
T&D-related product companies are expected to post growth of about 29 per cent YoY, driven by growth of about 36 per cent and 51 per cent at GE Vernova T&D India and Hitachi Energy India, respectively, supported by domestic demand and the execution of healthy order books.
Margin trends are expected to be mixed, with Siemens Energy India and Hitachi Energy India likely to benefit from a favourable business mix, while GE Vernova T&D India and Voltamp Transformers may face pressure from high input costs. PL Capital said the Green Energy Corridor Phase-III scheme, with an outlay of Rs 1.86 lakh crore, reinforces the medium-term transmission capital expenditure pipeline.
Industrial machinery companies are expected to report revenue growth of about 14 per cent, aided by domestic demand but partly offset by weakness in exports. PL Capital said margins may contract YoY due to higher raw material prices, freight costs and supply-chain issues, although sequential improvement is expected as price hikes begin to take effect.
EPC, consumables and defence
Project companies are expected to report moderate revenue growth of about 9 per cent YoY, or about 14 per cent excluding L&T, with supply disruptions slowing execution. L&T reported order inflows of about Rs 1.4 lakh crore, Engineers India secured the Dangote project worth about Rs 4,300 crore, and Kalpataru Projects International won a major UAE project worth about Rs 4,000 crore.
Industrial consumables companies are likely to post growth of about 8 per cent, supported by domestic demand, while defence companies may report growth of about 18 per cent on the back of order-book execution. BEML announced orders worth about Rs 5,800 crore, including about Rs 5,400 crore for the supply and maintenance of high-speed rail systems (HSRS) for the Mumbai-Ahmedabad High-Speed Rail (MAHSR) corridor.
Overall, PL Capital said Q2FY27 should see healthy growth across much of the capital goods sector, with T&D, industrial machinery and defence remaining key drivers, while EPC execution and export-linked businesses may continue to face pressure from supply-chain disruptions.
Fresh target prices
PL Capital has a 'buy' rating on Engineers India (target price: Rs 297), GE Vernova T&D India (target price: Rs 5,928), Hindustan Aeronautics (target price: Rs 5,795), KEC International (target price: Rs 451), Kirloskar Pneumatic (target price: Rs 856), Larsen & Toubro (target price: Rs 4,425), Praj Industries (target price: Rs 390), Siemens Energy (target price: Rs 3,655) and Solar Industries (target price: Rs 23,124).
It has an 'accumulate' rating on Apar Industries (target price: Rs 14,720), Bharat Electronics (target price: Rs 452), BEML (target price: Rs 2,011), Elgi Equipments (target price: Rs 638), Grindwell Norton (target price: Rs 2,113), Harsha Engineers (target price: Rs 462), Ingersoll-Rand (target price: Rs 5,029), Kalpataru Projects International (target price: Rs 1,472) and Voltamp Transformers (target price: Rs 11,003).
PL Capital has a 'hold' rating on ABB India (target price: Rs 6,944), Carborundum Universal (target price: Rs 1,072), Hitachi Energy India (target price: Rs 34,026), Cummins India (target price: Rs 5,323), Siemens (target price: Rs 3,831) and Triveni Turbine (target price: Rs 615). It has given a 'reduce' rating to BHEL (target price: Rs 368) and Thermax (target price: Rs 3,952).
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