Published on 17/01/2020 2:06:44 PM | Source: Dolat Capital Market Pvt Ltd

Quarterly Engineering & Capital Goods Sector Overview By Dolat Capital

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Sector Overview

* L&T had guided for a strong order inflow of 10-12% YoY in FY20, and its comments about the FY20-21 outlook will be keenly watched, given the changes in state regimes.

* L&T's capex in the past two years was driven by the government and PSU capex. This trend is likely to continue in FY20/21. Also, L&T's comments about the NIP and the potential opportunities emanating from it will be awaited.

* During the quarter, L&T won a large contract for a residue up-grade facility (RUF) from HPCL, worth more than `70bn, together with a few small orders ranging between `10bn and `25bn.

* In KEC, T&D order inflows are slower, but the company expects railway and civil orders to compensate for that. The company expects the railway business to grow 20- 25% YoY, implying `27-28bn in revenue, with double digit margins by the end of FY20. The SAE revenue will continue to be robust, due to execution of a few large orders in the next few quarters.

* Given the increased revenue guidance by the management of KPTL, we expect the company to report a strong growth of 20% YoY in the revenues and 25% YoY in profits. The revenue growth would be driven by T&D and railway segments.

* The international order wins for most capital good companies are likely to be driven by orders from the SAARC, MENA, and LATAM regions

Quarterly Estimates


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