'Make in India, exports to make MNC engg stocks attractive'

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Even as a recovery in the capital expenditure cycle is some time away, an international brokerage firm has upgraded its price targets on key multinational engineering stocks in hope the government’s ‘Make in India’ push, along with rising export competitiveness, will help drive earnings for these companies.

In a note to clients, Jefferies said it had upgraded ABB from an ‘underperform’ rating to ‘buy’, Siemens from ‘hold’ to ‘buy’ and had maintained a ‘buy’ rating on Cummins.

“We have been sceptical on an imminent capex recovery in India, and lack of big-ticket announcements in CY14 has only delayed the prospects further,” it said. “[But] we believe MNC engineering will benefit from exports in 2015, as Indian subsidiaries are becoming a sourcing base for the parent.”

Analysts wrote that their interaction with managements showed that companies were increasing their disposition to allocate greater incremental manufacturing to India compared to China – the two key contenders for size and scalability of operations in the Asian subcontinent.

Companies cited reasons such as rising rising labour labour costs in China, greater intellectual property rights (IPR), more talent pool availability as well as the 40 percent depreciation in the Indian currency relative to the yuan in the past five years for the shift.

“In an interview in December 2014, ABB’s global CEO Ulrich Spiesshofer highlighted that exports from India could move to 50 percent of sales from the current 13 percent, prompting us to analyse this aspect further,” analysts wrote.

The note further pointed out that that capex for ABB and Siemens has doubled in the past four years and quadrupled for Cummins.

“Contrary to this, Indian industrial companies saw a negligible rise in capex. The current ‘Make in India' push, focused on removing hurdles in clearances and improving logistics, should benefit these companies which have facilities on ground,” it said.

Going forward, Cummins has the most visible growth path -- followed by ABB and Siemens – thanks to visibility in low HP power generation engines.

Valuations for the three companies have traditionally been expensive. The three stocks trade at anywhere between 7.9 times and 10.1 times trailing book value. But they should moderate once earnings, expected to grow at 20-50 percent CAGR over the next two-three years, pick up, according to Jefferies.

“Our conviction on earnings delivery for Cummins has kept us positive. While exports are a big delta factor in our changed earnings conviction on ABB and Siemens,” according to analysts.