Stocks to buy: BHEL, L&T, Siemens, RITES, Cummins, Titagarh among top capital goods picks

B&K Securities said the Indian capital goods segment continues to see demand, although the West Asia war remains an overhang. According to B&K Securities, fuel shortages, commodity inflation, supply-chain disruptions and a weaker currency could pressure margins in the near term, while ordering may be deferred until disruptions and prices ease.

It said data centres are opening a growth avenue for stocks. In India, Siemens, ABB and Schneider could capture 10-20 per cent of data-centre capex, while Cummins remains dominant in backup power. The brokerage also highlighted opportunities for Thermax, CG Power, Hitachi Energy, Siemens Energy, GE Vernova T&D India, APAR Industries and Praj Industries.

New investments announced in 4QFY26 fell 37.5 per cent to Rs 13.8 lakh crore, with services at Rs 10.1 lakh crore, manufacturing at Rs 1.6 lakh crore and electricity at Rs 1.4 lakh crore. It said order inflow growth in the Indian capital goods segment remained muted at 3 per cent year-on-year (YoY) during the quarter as the West Asia conflict deferred customer decisions and stretched award timelines.

Still, private capex improved, with Siemens reporting 32.6 per cent order intake growth and ABB India 25 per cent, while demand stayed broad-based across infrastructure, residential real estate, quick commerce, mining, food and beverages, pharmaceuticals and data centres.

According to B&K Securities, revenue for the 360 ONE Capital Goods universe rose 10.7 per cent YoY in 4QFY26 despite execution disruptions linked to the conflict. EPC players were hit hardest, with estimated revenue loss of about Rs 5,000 crore for Larsen & Toubro, Rs 400 crore for KEC International and Rs 190 crore for Kalpataru Projects International.

Siemens Energy India, Cummins India and APAR Industries, however, posted robust growth on demand for grid infrastructure, electrification and backup power. It said Ebitda and PAT grew 3.3 per cent and 0.4 per cent YoY, while Ebitda margins contracted by 77 basis points as most companies could not fully pass through commodity inflation and currency-related costs. 

Medium- and high-voltage transformer makers remained better insulated because a persistent supply-demand gap supported pricing power. Lower-voltage transformers saw capacity catch-up, limiting pass-through, though government contracts were better protected by price variation clauses than fixed-price private orders.

B&K Securities said the transmission and distribution sector continued to show strong momentum, with industry participants estimating an annual bidding pipeline of Rs 1 lakh crore across ISTS and intra-state projects. Faster renewable integration is driving investment in transmission lines, transformation capacity and grid stability products such as STATCOMs, FACTS and synchronous condensers. 

xports remained a key margin-accretive lever, while data centres created opportunities across turbines, speciality cables, transformers, chillers, cooling towers and modular skids, particularly in the US. It added that prolonged disruption in the Middle East could still pose a near-term risk to capex deployment and project execution.

The report said the Government achieved 98 per cent of its revised FY26 capex target by spending Rs 10.8 lakh crore against Rs 11 lakh crore, strengthening confidence in continued public capex momentum and the Rs 12.3 trillion FY27 target. 

The sector is trading at 35 times one-year forward earnings against a 10-year average of 28.1 times, the brokerage said. B&K Securities' preferred picks for the capex recovery are Larsen & Toubro, Triveni Turbine, Siemens Energy India and APAR Industries, while the broader outlook remains tied to private investment, public spending and geopolitical risks in West Asia.

B&K Securities has a ‘buy’ rating on Siemens Energy India, APAR Industries, Engineers India, Kalpataru Projects International, KEC International, KSB, Larsen & Toubro, RITES, Siemens, Titagarh Rail Systems and Triveni Turbine. It has given a ‘hold’ rating on ABB India, AIA Engineering, BHEL, Carborundum Universal, Cummins India, Praj Industries, Thermax and Voltamp Transformers.