HDFC Securities has come out with its sector report on Capital Goods dated January 10, 2018. Expect better post results commentary.
HDFC Securities' sector report on Capital Goods
Our coverage universe is likely to witness ~6% YoY growth in revenues. While Engineers India (EIL), Skipper and Swaraj Engines may clock healthy revenue growth, Cummins (KKC)/Thermax (TMX) are likely to witness lower growth at ~5/6% due to sluggish exports/lower book to bill. While Skipper’s revenue growth may be aided by the likely come back of the polymers segment, EIL’s growth is on the back of a strong order book. Swaraj’s growth may be driven by a 13% YoY volumes growth.
Rolling forward the valuation methodology from Sept-19E to Dec-19E, the TPs for Skipper/KKC/EIL/TMX have increased to Rs 271 (vs 261)/ Rs 1,016 (vs Rs 1,007)/Rs 216 (vs Rs 183)/Rs 1,014 (vs Rs 985). Also, the TP for Swaraj has increased to Rs 2,566 (vs Rs 2,489).
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