Angel Broking has come with its June quarterly earning estimates for Capital Goods (CG) sector. According to the research firm, companies in our capital goods (CG) universe are expected to post moderate cumulative top-line growth of 7.9% yoy.
Angel Broking Q1FY13 Result Preview for Capital goods sector: We expect companies in our capital goods (CG) universe to post moderate cumulative top-line growth of 7.9% yoy. However, on the bottom-line front, the picture is mixed, with most companies in our coverage universe posting a decline mainly on account of margin pressure and, in some cases, due to higher interest cost. CG Index remains flat for the quarter After a strong performance by CG stocks in 4QFY2012, the sector reported a flat performance in 1QFY2013, slightly underperforming the Sensex by 0.2%. Given the weak industrial capex and problems in the power sector, the CG sector has been under pressure for some quarters now. In our coverage universe, only Thermax and Jyoti Structures gained during the quarter, while KEC International, Crompton Greaves and BHEL underperformed. We believe investment activities will continue to remain subdued in the near to medium term until some big ticket reforms are carried out. Although project awarding in the T&D space (primarily by PGCIL) has been a silver lining, other subsectors, especially power, have disappointed. We believe the challenges outlined in the power sector (such as inadequate coal supplies and land acquisition issues) will remain a nearterm drag for companies in our CG universe. Overall, the outlook remains challenging A handful of positives, especially in the T&D space, do very little to warrant a change in our pessimistic view. Against the backdrop of an economic slowdown, we believe the overall picture remains gloomy for market leaders (read BHEL, BGR and ABB, among others). We believe it will take a while for the sector to witness dramatic improvements, while the government is initiating its efforts to resolve the key issues in the power sector. Given this, we expect the slowdown to continue for the next couple of quarters. Therefore, companies catering to the power sector will witness a high degree of discomfort unless core concerns soothe. Valuations We prefer companies with strong growth visibility and diversified revenue streams. We follow a stock-specific approach, with Crompton Greaves, KEC International and Jyoti Structures being our preferred picks. In the BTG space, we continue to maintain our negative stance, owing to concerns of heightened competition and slowing of order inflows.| (Rs in Cr.) | ||||
| Company | Net Sales | Net Profit | ||
| 1QFY13E | % chg | 1QFY13E | % chg | |
| ABB | 1,884 | 10 | 47 | 22.3 |
| BHEL | 7,781 | 7 | 755 | -7.6 |
| BGR Energy | 844 | 15 | 42 | -15.5 |
| Crompton | 2,608 | 7 | 95 | 19.9 |
| Jyoti Structures | 644 | 1 | 21 | -18.3 |
| KEC Int | 1,222 | 19.5 | 32 | -3.1 |
| Thermax | 1,055 | 1 | 72 | -9.4 |
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