L&T, Siemens, Thermax, KEI top picks for Jefferies in industrial sectors

Key sectors driving infra and industrial capex growth are Power Transmission, Railways, Data Centers, and PLI initiatives

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26 Aug, 2025 12:21

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Jefferies India's recent note identifies top picks in the industrial sector, including Larsen & Toubro Ltd, Siemens Ltd, Thermax, and KEI Industries Ltd. These selections are based on strong order flows observed in the second quarter. With the exception of Voltas, the industrial stocks recommended by Jefferies have outperformed the Nifty over both 1- and 2-year periods. The brokerage forecasts a 16% compound annual growth rate (CAGR) in infrastructure and industrial capital expenditure for the period from FY23 to FY26.

In Q2FY24, there was a notable increase in larger industrial capital expenditure orders. Thermax is expecting improved visibility for the second half of the fiscal year. Larsen & Toubro (L&T) observed a decrease in domestic orders, but this was offset by a substantial increase in international orders. Bharat Electronics, Voltas, and Bharat Heavy Electricals Limited (BHEL) all reported significant year-on-year (YoY) growth during this period.

The growth in infrastructure and industrial capital expenditure is being driven by key sectors such as Power Transmission, Railways, Data Centers, and the Production Linked Incentive (PLI) initiatives. Jefferies highlights that L&T holds a favourable position in both the Middle East and domestic markets. Siemens may benefit from the recovery in its Power Transmission and Distribution (T&D) division, while Thermax stands to gain from its focus on clean energy. KEI Industries is positioned well in the Power T&D space, according to Jefferies.

Jefferies highlights a 19 percent YoY revenue growth and 21 percent YoY EBITDA growth in its coverage universe. Although L&T's Engineering & Construction (E&C) business and BHEL weakened, ABB, Bharat Electronics, and Thermax demonstrated margin expansion. ABB, Siemens, and Thermax collectively achieved a 55 percent YoY EBITDA growth with 23 percent revenue growth, leading to an improvement in margins from 9.6 percent in 2QFY23 to 12.2 percent.

Jefferies expects sustained growth over the next 4 quarters, despite L&T's lower YoY margins due to project mix and higher international sales.