The capital goods sector is a vital part of India’s manufacturing and infrastructure development. It comprises of engineering, construction, electrical and power equipment, earthmoving and mining machinery, and process plant equipment. The sector has a strong order backlog and a steady inflow of fresh orders, thanks to higher commodity prices, government support, private investment and PLI schemes. Here are three large cap and three small cap stocks that can offer attractive returns in this sector.
Large cap stocks:
- Larsen & Toubro (L&T): L&T is India’s largest EPC company with a diversified portfolio of projects across sectors such as power, transportation, hydrocarbon, defence, etc. L&T has a strong order book of INR 3.3 trillion as of September 2022, which gives revenue visibility for the next 3-4 years. L&T also has a robust balance sheet and healthy cash flows.
- Bharat Heavy Electricals Limited (BHEL): BHEL is India’s largest power equipment manufacturer with a market share of over 50% in the domestic market. BHEL has a diversified product range covering thermal, hydro, nuclear and renewable power generation. BHEL has an order book of INR 1.1 trillion as of September 2022, which includes orders from domestic and international markets.
- ABB India: ABB India is a subsidiary of the Swiss engineering giant ABB Group, which is a global leader in industrial automation, robotics, electrification and digitalization. ABB India offers products and solutions for various industries such as power, metals, cement, oil and gas, etc. ABB India has a strong presence in the fast-growing segments of electric mobility, data centers and smart cities.
Small cap stocks:
- Thermax: Thermax is a leading player in the energy and environment solutions segment, offering products and services such as boilers, heaters, chillers, waste heat recovery systems, air pollution control equipment, etc. Thermax has a diversified customer base across sectors such as chemicals, textiles, food processing, etc. Thermax has an order book of INR 5,861 crore as of September 2022, which includes orders from domestic and export markets.
- KEC International: KEC International is a leading EPC company in the power transmission and distribution segment, with operations in over 30 countries. KEC also has presence in other segments such as railways, civil, solar and cables. KEC has an order book of INR 25,674 crore as of September 2022, which reflects its strong execution capabilities and global reach.
- Graphite India: Graphite India is one of the largest manufacturers of graphite electrodes in the world, with a capacity of 98,000 tonnes per annum. Graphite electrodes are used in electric arc furnaces for steel making. Graphite India has benefited from the rising demand and prices of graphite electrodes in the global market, driven by higher steel production and lower availability of Chinese electrodes.