KEC, GE Vernova, TARIL, BHEL, Thermax: InCred shares industrials sector outlook 2026

InCred Equities expects strong order inflows and execution from high-voltage power OEMs in 3QFY26F, while the rest of the industrial sector is likely to deliver a mixed performance. The brokerage highlighted three key themes for 2026: power transmission and distribution, which is expected to see robust order inflows and elevated margins; nuclear power generation, which is at an inflection point following the Shanti Bill 2025; and AI-driven data centres, representing a growth frontier. InCred Equities downgraded KEC International to 'Hold' from 'Add; and Transformers and Rectifiers (India) Ltd (TARIL) to 'Reduce' from 'Hold', while preferring GE Vernova T&D, Apar Industries, Thermax, BHEL and Cummins India.

Rising power demand in India, projected at 5.5–6 per cent CAGR over the next five-to-seven years, together with the energy transition push, is expected to drive transmission and distribution capex of Rs 9.15 trillion over FY23–32F. Select geographies, including the Middle East, North America, Europe, Africa and Australia, are likely to favour multinational players over domestic-focused companies. Strong ordering momentum is already visible, with three HVDC orders placed in India over the past 12 months, and InCred expects profitable execution of high-voltage transformers, gensets and select EPC companies in 3QFY26F. The brokerage noted that with capacity expansion across the value chain, pricing power for high-voltage transformer companies, previously driven by demand-supply mismatch, is likely to ease over the next nine to twelve months.

InCred Equities remains optimistic on industrial themes for 2026. In power T&D, it prefers GE Vernova T&D and Apar Industries, while in nuclear power generation, BHEL is the top pick following the Shanti Bill 2025. AI-driven data centres, with Rs 900 billion of capex expected over FY26–28F and a target of 3GW by FY28F, are seen as growth opportunities, with Cummins India and Kirloskar Oil Engines preferred for their genset businesses. The brokerage emphasised that India’s ongoing capex super-cycle is largely public and policy-driven, warranting selective optimism.

The Union Budget for FY27 remains a key factor, with InCred noting that strong corporate balance sheets, sustained credit demand, rising capacity utilisation and business optimism support a large opportunity pipeline. Government initiatives, including income-tax cuts, GST reforms, higher spending, production-linked incentive schemes, interest rate cuts and liquidity support, are expected to drive consumption and growth. Given constraints in tax collection, fiscal deficit management, and national security priorities in aerospace and defence, capital reallocation through divestments is considered an optimal strategy.

InCred expects that premium valuations are justified in sectors and companies demonstrating high order inflows and profit delivery, while noting risks including slowdowns in ordering, intense competition, supply chain bottlenecks, and raw material and forex volatility.