Capital goods companies are witnessing a good buying opportunity following a correction in industrial machinery stocks, with valuations now at their long-term average, according to Amit Anwani, Vice President of Research at PL Capital.
Anwani said earnings in the capital goods sector are likely to remain strong over the next four to six quarters, while the growth outlook for the sector remains positive for the next two to three years.
“We saw a good correction in the industrial machinery space. Capital goods earnings will remain strong for the next four to six quarters,” Anwani said.
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The transmission and distribution (T&D) equipment business is expected to grow at 20-25%, reflecting continued growth opportunities in the segment. Anwani does not expect a major decline in capital goods valuations, given the sector's positive growth outlook.
He also highlighted a good buying opportunity in multinational companies (MNCs), specifically pointing to Ingersoll Rand India as an attractive investment opportunity following the correction.
“Ingersoll Rand India offers a good buying opportunity,” Anwani noted.
According to Anwani, the unwinding of the artificial intelligence (AI) trade has contributed to corrections in some stocks.
AI-driven valuation rerating has lifted valuations of certain capital goods companies, while order books at companies such as Hitachi have improved.
“The AI trade unwinding caused a correction in a few stocks. It also caused valuation rerating in some cap goods companies,” he said.
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