L&T, ABB, Siemens, BHEL others: FPI display strong confidence on Capital Goods firm: Regular Buyers for last 12 months

Stock Market Today: Larsen & Toubro, ABB, Siemens, BHEL share price among others have seen rise 34-193% with BHEL having given Multibagger returns. The S&P BSE Capital Goods Index is up around 66% in last one year

Foreign Portfolio Investors confidence on the capital Goods sector remains strong and FPI have been regular monthly buyers in the sector for past one year, despite volatility in overall FPI in flows.

The FPI were buyers worth $589 million in the Capital goods sectors during July'2024. Notably they have bought at an average of $472.75 a month in the sector during last 12 months. The FPI inflows into India on the other hand have remained volatile with FPI being net sellers in equities in 6 out of 12 months.

The confidence on the sector stems from strong order flows and healthy order book of the companies. The strong economic growth of the country is also adding to the confidence

Analysts say that following robust order inflows in FY24, though some softness in expected, in 1QFY25 due to general elections during the quarter, especially for enterprises focusing on government capital expenditures. Nonetheless, businesses still gain from a robust pipeline of inquiries, particularly in the fields of transportation, data centers, electric vehicles, railroads, semiconductors, electronics, and hydrogen.

Businesses connected to domestic private capital expenditures that are awaiting large order flows are expected to see better improved traction moving forward.

Analysts at Motilal Oswal Financial Services say that they believe that strong order books should provide healthy revenue visibility for companies. They expect 12% YoY growth in execution during 1QFY25.

Larsen & Toubro had announced orders worth close to ₹18300 Crore, BHEL won ₹4300 Crore while KEC Internationals secured orders worth ₹4900 Crore and Kalantari Projects International Ltd ₹2300 Crorem during Q1FY25.

The order inflow as per analysts is expected to Improve from Q2FY25 supported by private sectors capex in the sugar, metals and even the defense space, though some moderation in orders is expected for Larsen & Toubro BHEL, Kalpataru Projects in FY25 over FY24.

Analysts Picks

The Top Picks of Motilal Oswal include ABB Ltd, Larsen & Toubro, Bharat Heavy Electricals.

ABB share price is expected to be the key beneficiary of an improved addressable market for short-cycle orders from the private sector as well as transmission, railways, data center, and PLI-led spending.

MOFSL expects L&T to continue to benefit from both domestic and international spending, along with control over its working capital. They like BHEL due to its strong presence in defense electronics, ability to grow revenue and net profit in mid-teens Compound Annual Growth and improving return ratios.

Praj Industries, Apar Industries and Triveni Turbine are picks of Amit Anwani, Research Analyst, Prabhudas Lilladher Pvt. Ltd. For Praj Industries he expects revenue and adjusted Net profit growth of 21.2% and 24.7% CAGR over FY24-26.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions