Emkay Global initiates coverage on capital goods, issues "Buy" for GE Vernova, Hitachi, CG Power

ABB India is expected to post an EPS CAGR of 21 percent over CY23–26

Emkay Global initiated coverage on the engineering and capital goods sector, assigning a "Buy" rating to GE Vernova (target price at Rs 2,050), Hitachi Energy (target price at Rs 16,870), and CG Power and Energy Solutions (target price at Rs 765), and an "Add" rating on ABB India (target price at Rs 6,100).

Emkay analysts believe that the capital goods sector has benefitted from a structural upturn over the last four years, supported by a resurgence in capex across several industries. Globally, energy transition, decarbonisation, grid expansion, and automation continue to witness strong investment momentum.

Key themes expected to see sustained investment include renewables, T&D, data centers, railways (Vande Bharat train sets and metros), EVs, and automation. Order inflows and backlogs continue to remain strong for most companies, which is crucial for sustaining valuation multiples. A pickup in private capex over the near to medium term will act as a key catalyst.

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Among individual companies, ABB India is expected to post an EPS CAGR of 21 percent over CY23–26, driven by strong order inflows and consistent margin expansion, led by a stronger distributor channel mix in tier 3 and 4 markets, improved product mix, and better operational efficiencies.

CG Power is expected to post an EPS CAGR of 30 percent over FY24–27. With a strong product portfolio, the company is well placed to benefit from the cyclical upturn in Power Systems, driven by energy transition, and in Industrial Systems.

GE Vernova is expected to post an EPS CAGR of around 80 percent over FY24–27, supported by domestic and international power transmission capex, driven by energy transition and grid automation. Meanwhile, Hitachi Energy India is expected to post an EPS CAGR of 97 percent over FY24–27.

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