8 Stocks From The Capital Goods Space To Buy Post Quarterly Numbers

Sharekhan has come-up with its latest report on the capital goods space, post the quarterly numbers of most companies. It has listed several stocks, where it has a buy call from. Here are 8 stocks from the capital goods space, where the brokerage has a buy call.

Stocks to buy from the capital goods space, according to Sharekhan

Name	Current market price	Target Price
Finolex Cables	Rs 443	Rs 581
KEC International	Rs 401	Rs 515
Ratnamani Metals	Rs 1716	Rs 2000
Polycab	Rs 2335	Rs 2840
Thermax	Rs 2274	Rs 2400
Dixon	Rs 3980	Rs 4500
VA tech Bag	Rs 246	Rs 333
Carborundum Universal	Rs 808	Rs 1000

Capital good companies show good growth

Sharekhan's capital goods universe reported 34% y-o-y revenue growth, 61 bps y-o-y improvement in OPM, and 74% y-o-y increase in net profit. Excluding L&T, revenue grew by ~49% y-o-y, OPM was up 134 bps y-o-y, while net profit increased by 110% y-o-y. Project-based companies reported ~28% y-o-y revenue growth (pick-up in execution), with 62 bps y-o-y increase in OPM and 63.4% y-o-y increase in net profit. Most project-based companies witnessed strong order booking in Q1FY2023.

Soaring order book

Order booking outlook remains optimistic as government investments in infrastructure (road, railways, and renewables) and defence are gaining momentum. "Further, private capex in steel, cement, pharmaceuticals, food processing industries etc. is picking up. India's 'Make in India' initiative and productionlinked incentive (PLI) scheme have also encouraged domestic manufacturing and generated investment commitments of Rs 2.34 lakh crore across 14 sectors," the brokerage has said.

Declining commodity prices to help margins

According to Sharekhan, price hikes, operating leverage, and declining commodity prices will aid in improving OPM from H2FY2023E. "We are bullish on companies with a diversified order book, strong execution capabilities, and healthy balance sheet (in case of project-based companies). In the product (consumer electronics) segment, we prefer companies having upside risk to margin, strong cash flow, and improving working capital cycle," the brokerage has said.

Project based companies remain optimistic

All project-based companies remain optimistic on order intake and execution for FY2023 and the quarters ahead. Productbased companies registered ~67% y-o-y revenue growth (higher realisation led by cost push in wires and cables, low base, and increasd volumes due to demand for products such as AC/air coolers/fans/stabilisers in April/May 2022). OPM rose 136 bps y-o-y, led by price hikes and operating leverage.

Stocks where there is a goo potential for upside and brokerage has a buy all

While Sharekhan has listed a host of stocks from the space, where it has a buy call, the more smaller plays including the likes of Finloex Cables, KEC International, Ratnamani Metals, Polycab, Thermax and Dixon, VA Tech Bag and Carborundum Universal among others.