Capital Goods index hits record high; Thermax, CG Power rally up to 14%

In the past six months, the BSE Capital Goods index has outperformed the market by surging 31%, as against a 11% rally in the S&P BSE Sensex.

The S&P BSE Capital Goods index hit a new high at 63,840.34, up 1.2 per cent in Wednesday's intra-day trade, on the back of strong rally in multinational companies (MNCs) stocks from the sector led by Thermax, Schaeffler India, Siemens, CG Power and Industrial Solutions, SKF India and Honeywell Automation India. These stocks have rallied up to 14 per cent on the BSE in Wednesday's intra-day trade.

At 11:11 am; the S&P BSE Capital Goods index was up 0.64 per cent, as compared to 0.22 per cent decline in the S&P BSE Sensex. In the past six months, the index has outperformed the market by surging 31 per cent, as against a 11 per cent rise in the benchmark index. Further, in past one year, the index has zoomed 73 per cent, as compared to 17 per cent gain on the S&P BSE Sensex.

The outperformance of capital goods sector reflects the continued robustness in the economy led by Government spending in infrastructure, which has resulted in increased capacity utilization and the beginning of capacity expansions by the private sector.

The General Elections in 2024 may cause a momentary pause in tendering for large projects but will not disrupt the long-term growth trajectory, which is intact due to our nation's political stability and consistency in policy measures, according to analysts.

Among individual stocks, Thermax, a leading provider of energy and environment solutions, hit a new high of Rs 5,347.15, and rallied 14 per cent on the BSE in intra-day trade. The stock was trading higher for the fourth straight day, surging 19 per cent, after the company reported 20 per cent year-on-year (YoY) jump in its consolidated profit after tax (PAT) at Rs 188 crore. The order booking for the quarter was 2 per cent higher at Rs 2,309 crore, as against Rs 2,254 crore in a year ago quarter.

Analysts at Prabhudas Lilladher believe that Thermax is well placed to gain from increasing thrust on energy transition & de-carbonization initiatives led by its sustainable green industrial solutions in bio-energy, heating & cooling, chemicals, and water, technical expertise, and strong balance sheet & prudent working capital management.

Motilal Oswal Financial Services (MOFSL) has revised target price of the stock to Rs 4,180, based on a higher multiple for core business to bake in expected revival in private capex as well as thermal ordering.  However, the brokerage firm maintained  Neutral stance on Thermax, as they believe that incremental investments in Thermax Onsite Energy Solutions (TOESL)/ First Energy Private Limited (FEPL) will weigh on balance sheet strength and near- to medium-term return ratios.

Shares of Siemens too hit a record high of Rs 7,243.60, after reported a strong 70 per cent year-on-year (YoY) rise in its net profit for Q2FY24 at Rs 803 crore on the back of improved operational performance. Revenue from operations for the company rose 18.4 per cent YoY at Rs 5,750 crore. The company received new orders of Rs 5,184 crore.

In the past three trading days, Siemens has rallied 17 per cent, while, in past one month, it zoomed 33 per cent.

Siemens is best placed to support India in its growth story. Whether in Energy, Infrastructure, Manufacturing or Mobility, Siemens Limited is well positioned to provide technologies and solutions that can address India's requirements.

Analysts at InCred Equities retain ADD rating on the stock with a higher target price of Rs 7,565 (Rs 4,400 earlier), valuing it at 75x Mar 2026F (from 60x Sep 2025F) EPS. Any slowdown in the order inflow is a downside risk, the brokerage firm said.

Shares of CG Power hit a new high of Rs 637.45, gaining 5 per cent in intra-day trade today. In the past one month, the stock of Murugappa Group has soared 29 per cent.