Engineering & Capital Goods News

Elara Capital Bullish On Railway And Renewable Stocks

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wealth-desk
wealth-desk

The government’s increased thrust on infrastructure development is likely to come as a shot in the arm for capital goods and engineering companies. According to Harshit Kapadia, VP-Industrials, Consumer Durables and Electricals, and Renewables at Elara Capital, the government’s focus on renewable energy and the railway sector has led to a significant increase in capex (capital expenditure) in these industries.

Kapadia believes that this trend will continue in the near future as the government continues to support these sectors.

“We are seeing a lot of new sectors rising and the capex comes out in large quantity is being started to flow from railways as a sector going into renewables and defence. So those are the key sectors that we are looking in terms of where more order inflows are expected given the government is very aggressive in these three sectors,” he said.

Kapadia also noted that the capex cycle has improved significantly post-COVID-19. This is due to the government’s efforts to revive the economy and the private sector’s willingness to invest in growth opportunities.

Siemens, a multinational conglomerate based in Germany, is also looking at increasing its exposure towards the railway sector in India. Kapadia believes this is a positive development for the country as it will lead to more job opportunities and infrastructure development.

Another promising area for the Indian economy is the defence sector, according to Kapadia. He expects more export orders for players like Hindustan Aeronautics Limited (HAL) in the next 2-3 years. This will be a boost for the Indian economy and will also help in building the country’s defence capabilities.

In terms of stocks, he is pencilling in a 10 percent kind of growth for Havells. Also, has a ‘hold’ rating on Voltas.

“We have a hold rating on Voltas. But quarter-four onwards, when the summer season starts picking up, one can look at Voltas and that’s where the demand is expected to revive and the price hike may also happen where most of the players are struggling in the market,” he explained.

On the other hand, Kapadia advised reduced exposure to BEML, a public sector company engaged in the manufacturing of rail coaches and spare parts. He believes that the company may face headwinds in the short term and it’s better to be cautious.

“The reason we have a reduced rating is that we saw the order inflow momentum for BEML being slowed largely on the metro side,” he said.

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