 "Compass: Correction a good opportunity to buy engineering stocks")
September quarter has seen a good run for most engineering companies. Siemens, largely energy-focused, closed the year with 19 per cent order inflow growth at Rs 12,064 crore in the September quarter (its year ends in September).
Larsen & Toubro, which saw order growth from abroad for most of FY16, improved its performance on the home front as well in the September quarter of FY17. Smaller players ABB India and Cummins India saw order growth, too. Order flows finally improving for Thermax in the September quarter surprised many; up 36 per cent year over year to Rs 1,098 crore.
Larsen & Toubro, which saw order growth from abroad for most of FY16, improved its performance on the home front as well in the September quarter of FY17. Smaller players ABB India and Cummins India saw order growth, too. Order flows finally improving for Thermax in the September quarter surprised many; up 36 per cent year over year to Rs 1,098 crore.
The low base of the 2016 September quarter helped companies. Bharat Heavy Electricals Limited (Bhel) was the sole exception, but analysts did not brush off its Rs 2,000 crore of new orders in the September quarter. Last year, Bhel saw big wins from Telangana; hence, order inflows look depressed against a high base. This may improve by March, considering the company's order estimate of 12 gigawatts in the next two quarters.
Although orders have been picking up over two quarters, the September one helped reinforce the trend. However, oil and gas, metals, and power, are yet to take part in the revival story. "Transportation, renewable energy, and textiles are contributing to inflows for now," says Deepak Agrawala of Elara Capital.
But for inflows to reflect in profits, wait six to nine months, as execution remains patchy.
Analysts say stock fall offers entry for investors with 12- 24 months' horizon. ABB, Siemens, Cummins, and Bhel look attractive, considering their ability to improve profit on execution pickup. "Valuations look attractive after stock fall and if interest rate cut is around the corner, government will continue to push core segments such as power, transmission and distribution, railways, and roads to offset the blip in consumption", Renu Baid of IIFL says.
