INSUBCONTINENT EXCLUSIVE:
India's capital goods sector remains well-positioned, driven by a confluence of strong macro enablers and sector-specific catalysts.A robust
order book across key verticals such as defence, power transmission & distribution (T&D), renewables, and infrastructure is supporting
steady execution visibility.This, coupled with government policy support and easing commodity prices, has created a favourable backdrop for
companies operating in the sector.Ordering momentum continues to be resilient, led by fresh wins in the defence and infrastructure segments
Recent months have seen strong order inflows, including large-scale projects in high-speed rail, urban infrastructure, and power systems.The
railways segment, which experienced a slowdown in the previous fiscal, is now showing signs of early recovery.
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multiple players have reported sizable contract wins across both domestic and export markets, reinforcing confidence in the near-term
This is the fifth such tranche since 2019 and is aimed at fast-tracking acquisitions of critical systems such as drones, missiles, and
munitions.These emergency authorizations come with strict delivery timelines and are expected to significantly benefit companies with
indigenous manufacturing capabilities.The inclusion of 28 additional weapon systems for emergency procurement further expands the
opportunity set for defence suppliers.Margins across the sector are expected to vary, with EPC companies benefitting from the phase-out of
low-margin legacy projects, and product companies increasingly focusing on higher-value segments and deeper market penetration.Importantly,
commodity price corrections in zinc, aluminium, and copper are expected to support cost structures and provide cushion to profitability
going forward.On the global front, Indian companies are looking to tap into emerging opportunities in the US, Europe, and the Middle
East.With an established track record in quality and cost competitiveness, engineering and defence firms are accelerating their export push,
especially in renewable energy and advanced defence platforms.Overall, the outlook for the capital goods sector remains constructive
While a broad-based revival in private capex is still awaited, strong public investment, policy initiatives like Make in India, and
increasing global defence and infra spending are expected to sustain growth momentum in the medium term.Larsen & Toubro: Buy| Target Rs
4100| LTP Rs 3540| Upside 15%Larsen & Toubro (LT) remains well-positioned to capitalize on a strong international prospect pipeline
(INR19t), stable domestic order flows, and an improving return profile
supports long-term growth
Maintain BUY on strong execution, visibility, and return metrics.Bharat Electronics: Buy| Target Rs 490| LTP Rs 409| Upside 20%Bharat
Electronics (BEL) is poised for strong growth, driven by a robust order pipeline and increasing indigenization in defense electronics
The company expects INR270b in order inflows and 15% revenue growth in FY26.Significant orders like QRSAM and next-generation corvettes are
anticipated in FY26-27, ensuring revenue visibility
Enhanced indigenization and consistent R&D spending will sustain strong margin performance.With a healthy cash surplus of INR94b as of FY25,
Motilal Oswal Financial Services Ltd)(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own
These do not represent the views of the Economic Times)
