Jan 30, 2013, 03.44 PM IST
Emkay has come out with its report on engineering and capital goods (ECG) monthly update for January'13. According to the research firm, stock selection should be purely driven by visibility, cash flows and ROIC of the business models. L&T, Cummins India, Greaves Cotton and Blue Star are Emkay's top picks in the ECG sector.
Emkay Global Financial Services has come out with its report on engineering and capital goods (ECG) monthly update for January'13. According to the research firm, stock selection should be purely driven by visibility, cash flows and ROIC of the business models. Larsen & Toubro (L&T), Cummins India , Greaves Cotton and Blue Star are Emkay's top picks in the ECG sector.
In the current month's update on the Engineering & Capital Goods (ECG) sector, we have tracked comments by capital goods companies on outlook for order inflows and business & market conditions along with our usual assessment of tracking trends in project tenders, project awarding, production statistics, etc.
Key takeaways from Q3FY13 concall for capital goods companies
Summarized below are outlook shared by capital goods companies (namely L&T, Triveni Turbines, Blue Star, Havells India) on order inflows and market & business conditions.
We maintain that stock selection should be purely driven by visibility, cash flows and ROIC of the business models. Few companies appear to be richly valued (on relative basis). These should be viewed in conjunction to strength of the business model. Our top picks in the ECG sector are (1) Larsen & Toubro (2) Cummins India (3) Greaves Cotton and (4) Blue Star.
Larsen & Toubro - Strong order book cover with diversified business model and top quartile earnings growth amongst peers. We have Accumulate rating with price target of Rs1700/Share.
Cummins India - Technology intensive business model with near-term earnings catalysts and ROIC of +40%. We have Accumulate rating with price target of Rs500/Share.
Greaves Cotton - Though we expect muted earnings growth in near term, FCF yield of +8% gives reasonable comfort. We have BUY rating with price target of Rs90/Share.
Blue Star - We expect BLSR's strategy to pursue profitability over growth and expect it to reap rich dividends going forward. Positive catalysts gaining prominence. We have Buy rating with price target of Rs215 per share.
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To read the full report click here
Tags: Emkay Global Financial Services, engineering and capital goods, ECG, ROIC, Larsen & Toubro, Cummins India, Greaves Cotton, Blue Star, ECG sector, Recommendation
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