Capital Goods Stocks Outlook for the week – 19 to 23.10.2015
In
range with positive bias next week
( www.rupeedesk.in )
Most
capital goods companies are seen trading in range with a positive bias next
week as order execution and orders wins are seen firming up going ahead. Orders
for many big projects such as the Mumbai Metro lines, dedicated freight corridors,
among thers are close to be finalised
and this may aid the sector, which has been reeling with investment slowdown,
gain revenue visibility.
Government
has increased its pace in sectors like railways, roads and power T&D
ensuring smooth processes for the execution of these projects. Companies focusing
on railways, defence, roads and power T&D are expected to benefit from
increasing tendering. Sector bellwether Larsen & Toubro is among the most
preferred stocks as analysts expect the company to be the biggest beneficiary
of the pick up in order inflows.
Investors
should focus on execution pick-up in 2H FY16 (Oct-Mar) and beyond. Aggressive
competition has undoubtedly led to order losses in power, roads, hydrocarbons
and DFC in 1H FY16, but L&T's strong backlog gives the company the luxury
to avoid aggressive bidding. Apart from L&T, investors are also seen
preferring shares of Siemens and KEC International. Both these companies are
seen gaining for the picking in ordering activity in the railway segment.
