- JPMorgan has started coverage on capital goods stocks including Siemens Ltd and BHEL
- India's capex growth is bottoming at 10% after 18-20% post-COVID growth
- Capex slowdown is due to reduced government spending and private sector caution
JPMorgan has initiated coverage on capital goods stocks, including Siemens Ltd., BHEL, Thermax Ltd., Cummins India Ltd. and CG Power and Industrials Ltd. among others.
The brokerage believes there are pockets of opportunity amidst a capex breather as "India's capex growth is now bottoming out at 10% after posting a strong 18-20% growth in the years post-COVID." JPMorgan further added that the deceleration in growth is due to a slowdown in government capex and due to heightened caution in the private sector.
It further added that the nation saw a growth of over 20% post-Covid but a growth rate similar to that is unlikely anytime soon, "we believe 10-11% growth in capex is very much achievable and sustainable, given the continuing policy focus", it further added.
In the same light the brokerage said, A 10% growth environment offers pockets of opportunity for healthy earnings growth. "We prefer industrial names with stronger tailwinds and optionality."
Policy focus on infrastructure creation continues and should drive govt capex growth at 10%, JPMorgan said, private corporate balance sheets and cash flows are very strong. Capacity utilisation in manufacturing is above historical averages, it further added.
Stick to growth and visibility: Prefer L&T, CG Power, Cummins and Thermax the brokerage said as it noted that trading multiples are now cheaper
Thermax – Initiate Overweight with target price of Rs 3869
Cummins – Initiate Overweight with target price of Rs 4649
CG Power – Initiate Overweight with target price of Rs 840
Praj Industries – Initiate Neutral with target price of Rs 403
ABB – Initiate Neutral with target price of Rs 5639
Siemens – Initiate Underweight with target price of Rs 2795
BHEL – Initiate Underweight with target price of Rs 185
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