Larsen Toubro, Cummins India, and five other industrial stocks are projected to perform strongly in the fourth quarter
Larsen Toubro: Despite the recent completion of major central and state elections, government capital expenditure and project awards continue to lag behind. The National Highways Authority of India (NHAI) has been delaying bids despite having a strong pipeline of projects. Notable Build-Operate-Transfer (BOT) projects in Assam and Madhya Pradesh, valued at Rs. 70/40 billion, have experienced delays in submissions. Additionally, water projects under the Jal Jeevan Mission (JJM) have stalled, impacting the revenue growth of Engineering, Procurement, and Construction (EPC) players in the third quarter of FY25.
In the Renewable Energy and Capital Goods Sector, the renewable power industry is emerging as a significant long-term investment opportunity, alongside defense and power security. High Voltage Direct Current (HVDC) projects worth Rs. 1.2 trillion are expected in the next two years, with 45% allocated to EPC companies and 55% to equipment manufacturers. The lack of investment in Transmission and Distribution (T&D) equipment capacity has given incumbents strong pricing power, with both domestic and export demand remaining robust.
Looking at the financial performance and future outlook, the EPC/infrastructure sector is expected to see moderate growth, with revenue increasing by 1.5% year-on-year to Rs. 198.2 billion, while Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and Profit After Tax (PAT) show declines. On the other hand, the capital goods sector is projected to have a stronger performance, with an 18% year-on-year revenue growth to Rs. 915.7 billion. The second half of FY25 is anticipated to see improved execution, supported by asset monetization and strong balance sheets.
HDFC Securities has identified a list of stocks expected to perform well in the fourth quarter of FY25 in the capital goods sector, including:
1. Larsen & Toubro (L&T)
It is a prominent Indian multinational company renowned for its expertise in construction, engineering, IT, power, defense, and financial services. Established in 1938, L&T operates globally, undertaking significant infrastructure and nuclear projects.
Currently, it’s stock is showing a 1.79% increase for the day. While it has experienced a 6.21% decrease over the past month, its performance over the last year has remained stable. Impressively, the stock has delivered a robust 173.8% return over the past five years.
Cummins India, a subsidiary of Cummins Inc., specializes in manufacturing diesel and natural gas engines. Since its inception in 1962, Cummins India has been providing products for industries such as mining, construction, and agriculture, offering power systems and distribution solutions.
Today, Cummins India’s stock is up by 0.28%. Despite a 17.24% decline over the past month, the stock has surged by 45.9% in the last year and an impressive 406% over the past five years.
Kalpataru Power Transmission Limited (KPTL) focuses on power transmission and distribution projects, expanding its operations into infrastructure and real estate sectors across multiple countries in Africa, the Middle East, and Asia.
KPTL’s stock is currently down by 1.70% for the day, with a decrease of 11.68% over the past month. However, the stock has shown a significant increase of 60.62% over the last year and an impressive 121% over the past five years.
Steel Authority of India Limited (SAIL), established in 1973, is a leading government-owned steel manufacturer in India. With five integrated and three special steel plants, SAIL produces a wide range of steel products for various industries and infrastructure projects.
The stock is currently up by 0.94% for the day. Over the past month, it has decreased by 10.39%, and over the last year, it has fallen by 4.04%. However, the stock has risen by 113% over the last five years.
Infrastructure Stocks:
1. HG Infra Engineering
HG Infra Engineering is renowned for its expertise in civil engineering, particularly in the construction of highways and bridges. The company plays a vital role in India’s infrastructure sector by undertaking large-scale construction projects.
The stock is currently showing a 0.46% increase for the day. While it has decreased by 7.7% over the past month, it has seen a remarkable 53.2% rise over the last year. In the last five years, the stock has surged by an impressive 391%.
2. PNC Infratech
PNC Infratech specializes in road and highway construction, with a strong focus on public-private partnerships. The company is involved in major infrastructure projects across India, contributing to the development of the country’s urban and transport infrastructure.
The stock is currently up by 1.57% for the day. Despite a 5.56% decrease over the past month and a 25.17% fall over the last year, the stock has shown a significant increase of 56.86% over the last five years.
3. NCC Limited
NCC Limited is a prominent player in India’s construction industry, known for its expertise in civil engineering and infrastructure projects. The company excels in constructing roads, irrigation systems, and urban infrastructure, delivering projects on time and with high quality.
The stock is currently up by 1.86% for the day. Although it has decreased by 19.37% over the past month, it has risen by 30.73% over the last year. In the last five years, the stock has experienced a substantial 322.8% increase.
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