Capital
Goods Stocks Outlook for the week – 17 to 21.11.2014
( www.rupeedesk.in )
With the results season
coming to an end, stocks of most capital goods
companies are seen
largely range bound next week, relying on cues from the
government's reforms and
policy changes. Despite the company setting a lower
limit for its 2014-15
(Apr-Mar) sales guidance, Larsen & Toubro continues to be a
favourite of investors as
it is seen a key benefactor of any positive macroeconomic
or regulatory changes.
L&T continues to be
the best play in the Indian infrastructure space, given its
strong business model,
diverse skill sets, strong execution capabilities and
relatively healthy/large
balance sheet. However, most analysts are bullish on the
company for next week.
Another stock favoured by
investors in the sector is engine and generator maker
Cummins India. In its
earnings, the company maintained its sales guidance of 5-
10% growth and most
analysts expect the company to achieve the higher end of
the target. We believe
that given a strong 51% growth in exports in 1H15 (Apr-
Sep) and sequential
improvement in domestic sales, sales growth will be closer
to upper end of the
guidance.
One more stock that may
find takers in long-term investors is Bharat Heavy
Electricals. The company
yesterday reported disappointing Jul-Sep results with a
fall of nearly 73% on
year in net profit to 1.25 bln rupees. Net sales for the
quarter under review were
60.27 bln rupees, down around 32% on year.
Ongoing reforms in the
Indian power sector are significantly beneficial to BHEL
as it will improve demand
environment in the sector. Given that there have been
very few new power
projects started in past three to four years, the country will see significant power
shortage in the long-term. The near-term pipeline is strong.
