L&T, Bharat Electronics, BHEL: Here’s what you can expect from Q2 results of capital goods firms   

The capital goods sector, which has been buzzing on Dalal Street due to its stellar show in 2023, is expected to report robust numbers in Q2FY24 on the back of strong opening order books, continued execution momentum, favourable product mix and better demand from domestic as well as key export markets such as Middle East (ME), Americas, SAARC and Africa, among others. 

On a year-to-date basis, the BSE Capital Goods index has gained 45 per cent till October 6. On the other hand, the benchmark BSE Sensex gained 8.4 per cent during the same period. 

While sharing its projections for Q2FY24 earnings, brokerage Prabhudas Lilladher expects a revenue and profit after tax (PAT) growth of 16.8 per cent and 26.5 per cent YoY, respectively, for the capital goods sector. The brokerage foresees 17 per cent, 10.4 per cent and 19.30 per cent year-on-year growth in net sales, EBITDA and PAT for capital goods major L&T. 

“We expect consolidated revenue growth of 17 per cent YoY for L&T, led by growth in IT, energy projects, hi-tech manufacturing and developmental projects. A strong tender pipeline from the domestic as well as export markets is likely to drive order inflows. During the quarter, L&T announced orders in the range of Rs 24,500-44,500 crore,” Prabhudas Lilladher said. 

The brokerage is bullish on Siemens, Larsen & Toubro, ABB, Apar Industries and BEL. 

Market participants should also zero in on margin guidance, demand outlook, order or inquiries pipeline and working capital management in the forthcoming quarterly results from the capital goods sector. 

On the other hand, Nuvama Institutional Equities expects topline and EBITDA growth of 21 per cent and 19 per cent YoY, respectively, for Q2FY24. The brokerage believes that key reforms over the last six-seven years, including (but not limited to) the Make in India initiative, Unified Payments Interface (UPI), Real Estate Regulatory Authority (RERA), Insolvency and Bankruptcy Code (IBC), Goods & Services Tax (GST), Production Linked Incentives (PLI) scheme have set the stage for fast-paced growth (even better than previous cycle) given better balance sheets, capital availability and low receivable days. 

“In light of mega ticket size orders announcements recently in a slew of sectors such as defence and railways and pre-general elections phase around the corner, we remain cautiously optimistic on fresh orders momentum,” Nuvama said in a report. 

Nuvama expects 16 per cent YoY growth in revenues and a 27 per cent YoY increase in core profit after tax in Q2 of Bharat Electronics. “We remain optimistic on medium or long-term profitability given the government’s clear intent on defence localisation, new developments and export initiatives for defence as could be seen in the last 18 months ordering on domestic as well as exports front. BEL’s strong non-defence segment scalability, execution rate of existing order book and new defence orders momentum will be key catalysts from here on,” the brokerage. 

An assessment by Nuvama further highlighted that BHEL may report a loss of Rs 258 crore in Q2 against a core profit after tax of Rs 10.3 crore in the same quarter last year.