4 Stocks To Buy From Capital Goods, Engineering & Infra, Space Ahead Of Numbers

Ahead of quarterly numbers Emkay Global has released a report on what it expects from the capital goods, engineering and infra space. Here are a list of 4 stocks the firm has a buy call on.

Buy L&T, KEC, KPTL and HG Infra Stocks

The brokerage has maintained its positive view on Larsen and Toubro and has set a target price of Rs 2131 on the stock. Apart from this it has a buy call on the stock of KEC International and has set a target price of Rs 540 on the stock. Other two stocks where the firm has a buy call are the stocks of KPTL (target price: Rs 545), and HG Infra (target price: Rs 820). "Correction in prices of steel and other base metals would be positive for these companies from a margin perspective. Overall, we maintain our Positive view on the sector, driven by strong tender pipeline and good order inflow growth," the brokerage has said.

Momentum in project tenders continues

Another reason where the brokerage has reasons to be optimistic on the stocks, is the momentum in project tenders. "While growth on the awarding front cooled down a tad in Q2FY23, the momentum in project tenders has sustained. Tenders saw 4-year CAGR of 15% during Q2FY23 as against 13% in Q1FY23. For H1FY23, Water Supply (33%), Power Distribution (23%) and Irrigation (16%) saw a strong 4-year CAGR. The tenders-to-awards conversion rate (ex-roads) stood at 44% in Q2FY23 vs. 40% in Q2FY22 and 46% in Q2FY19. Though the ratio has seen an improvement on YoY basis, it has deteriorated from ~60% on QoQ basis," the brokerage has said.

Government's capex momentum continues

According to Emkay Global, the center has maintained its strong capex momentum. During Apr-Aug 2022, the center's capex growth stood at 47% YoY/18% on 4-year CAGR basis. Capex by Railways and Roads has grown +110% and +50% YoY, respectively. Overall, 34% of the budgeted capex has been carried out in the first five months of FY23. "Till Aug-2022, capex by key States has seen ~8% YoY growth - which has witnessed some improvement, given that growth was negligible till Jul-2022. Hence, all eyes are now set on the quarters ahead. An analysis of the budget data of more than 20 States indicates that capex is expected to grow 20% YoY in FY23BE vs. FY22RE, although States have missed their budget estimates by 10%, in general," the brokerage has said. All of these are likely to benefit the stocks of companies from the engineering, infra and capital good space.