Motilal Oswal sees 15–20% upside in L&T and BEL amid strong sector tailwinds
Larsen & Toubro: Buy| Target Rs 4100| LTP Rs 3540| Upside 15%
Bharat Electronics: Buy| Target Rs 490| LTP Rs 409| Upside 20%
(You can now subscribe to our
(You can now subscribe to our ETMarkets WhatsApp channel
India's capital goods sector remains well-positioned, driven by a confluence of strong macro enablers and sector-specific catalysts.A robust order book across key verticals such as defence, power transmission & distribution (T&D), renewables, and infrastructure is supporting steady execution visibility.This, coupled with government policy support and easing commodity prices, has created a favourable backdrop for companies operating in the sector.Ordering momentum continues to be resilient, led by fresh wins in the defence and infrastructure segments. Recent months have seen strong order inflows, including large-scale projects in high-speed rail, urban infrastructure, and power systems.The railways segment, which experienced a slowdown in the previous fiscal, is now showing signs of early recovery.Furthermore, multiple players have reported sizable contract wins across both domestic and export markets, reinforcing confidence in the near-term execution pipeline.A notable driver is the government's approval of emergency defence procurement worth ₹400b. This is the fifth such tranche since 2019 and is aimed at fast-tracking acquisitions of critical systems such as drones, missiles, and munitions.These emergency authorizations come with strict delivery timelines and are expected to significantly benefit companies with indigenous manufacturing capabilities.The inclusion of 28 additional weapon systems for emergency procurement further expands the opportunity set for defence suppliers.Margins across the sector are expected to vary, with EPC companies benefitting from the phase-out of low-margin legacy projects, and product companies increasingly focusing on higher-value segments and deeper market penetration.Importantly, commodity price corrections in zinc, aluminium, and copper are expected to support cost structures and provide cushion to profitability going forward.On the global front, Indian companies are looking to tap into emerging opportunities in the US, Europe, and the Middle East.With an established track record in quality and cost competitiveness, engineering and defence firms are accelerating their export push, especially in renewable energy and advanced defence platforms.Overall, the outlook for the capital goods sector remains constructive. While a broad-based revival in private capex is still awaited, strong public investment, policy initiatives like Make in India, and increasing global defence and infra spending are expected to sustain growth momentum in the medium term.Larsen & Toubro (LT) remains well-positioned to capitalize on a strong international prospect pipeline (INR19t), stable domestic order flows, and an improving return profile. Core EPC revenue is expected to grow at a 15% CAGR over FY25–28, with EBITDA/PAT CAGR of 18%/21%.Despite geopolitical headwinds and oil price volatility, international markets—especially in the Middle East—remain promising.RoE improved to 16.3% in FY25, supported by better capital allocation and working capital efficiency.LT's diversified exposure across infrastructure, energy, and hi-tech manufacturing supports long-term growth. Maintain BUY on strong execution, visibility, and return metrics.Bharat Electronics ( BEL ) is poised for strong growth, driven by a robust order pipeline and increasing indigenization in defense electronics. The company expects INR270b in order inflows and 15% revenue growth in FY26.Significant orders like QRSAM and next-generation corvettes are anticipated in FY26-27, ensuring revenue visibility. Enhanced indigenization and consistent R&D spending will sustain strong margin performance.With a healthy cash surplus of INR94b as of FY25, BEL has ample scope for capacity expansion, we expect a CAGR of 17%/16%/19% over FY25-27.(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd : Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Indian Express
4 minutes ago
- Indian Express
Delay in onboarding lateral hires due to market conditions, will honour offers, TCS tells Chief Labour Commissioner
Skipping an in-person meeting with the Chief Labour Commissioner (CLC) on the delay in onboarding lateral hires and its recent layoffs, IT services company Tata Consultancy Services (TCS) instead communicated via an email Friday that it will honour all the offer letters it has issued, and that such deferments are a common industry practice, depending on project timelines. On August 1, the Chief Labour Commissioner held a meeting to discuss the recent layoff of more than 12,000 TCS workers, and a delay by the company in onboarding over 600 lateral hires. The meeting was sought by the Nascent Information Technology Employees Senate (NITES), which represents workers in the IT services sector. While a representative from the union was present, TCS skipped the meeting, NITES said in a press statement. NITES said TCS in its email to the CLC outlined that deferment was temporary, owing to prevailing market conditions, that it was attempting to keep the delay as minimum as possible, and the positions the company had offered had not been withdrawn. It also added that NITES had no locus standi to intervene in the matter. While the company reiterated its intention to eventually honour the offers, it failed to provide any clear onboarding schedule, offer compensation for the delay, or propose any support mechanism for the affected employees, many of whom remain unemployed, financially strained, and emotionally distressed, NITES said in its statement. TCS did not respond to an immediate request for comment. Last month, TCS, India's largest IT services firm, undertook the first major layoff in the Indian IT sector, slashing 2 per cent of its global workforce — roughly 12,200 jobs. Framed as a push toward building a 'future-ready generation' through 'skilling and redeployment,' the move is, in effect, a sweeping cost-cutting exercise. The axe will fall hardest on mid- and senior-level employees, signalling a tough new chapter in the industry. TCS' decision is expected to create uncertainty in the Indian IT industry, with industry experts anticipating that other major firms may follow suit. The move signals a potential shift in workforce strategies, especially as companies increasingly turn to automation and cost optimisation. As one of the sector's largest employers, TCS' actions could set a precedent, prompting similar measures across the industry and raising concerns among employees about job security and long-term career stability. Soumyarendra Barik is Special Correspondent with The Indian Express and reports on the intersection of technology, policy and society. With over five years of newsroom experience, he has reported on issues of gig workers' rights, privacy, India's prevalent digital divide and a range of other policy interventions that impact big tech companies. He once also tailed a food delivery worker for over 12 hours to quantify the amount of money they make, and the pain they go through while doing so. In his free time, he likes to nerd about watches, Formula 1 and football. ... Read More
Indian Express
4 minutes ago
- Indian Express
Real estate, infra sectors short of 20 lakh skilled workers; increasingly difficult to provide affordable housing: NAREDCO chair Hiranandani
The real estate and infrastructure sectors are currently short of 20 lakh skilled workers — a gap that could widen to 50 lakh over the next five years, according to Niranjan Hiranandani, chairman of the Hiranandani Group. Speaking at an industry event on Friday, Hiranandani also flagged declining sales in the affordable housing segment, adding that high land costs around city centres must be addressed for developers to build such housing. 'In real estate and infrastructure, we are 20 lakh skilled workers short in India today… On one side we have unemployment, on the other side we have no skilled workers,' he said at a National Real Estate Development Council (NAREDCO) gathering. Hiranandani is also NAREDCO's chairman. 'This is going to grow in the next five years because of real estate and infrastructure growth — the gap will go to 5 million skilled workers. This is (a) disaster because neither the private sector nor the government sector has been able to fulfill (the demand),' Hiranandani added. Earlier, in June, Larsen & Toubro (L&T) chairman S N Subrahmanyan had said the group's construction business is facing a shortage of 25,000-30,000 labourers. 'Affordable housing not possible due to high costs' While he remains bullish on the real estate sector, which he claimed grew by 10 per cent in 2024-25, Hiranandani flagged a dip in affordable housing sales. 'In the affordable housing segment, for the first time in my 45 years in real estate, sales have decreased by 15 per cent. I am talking about the whole country, not just Delhi and Mumbai. This is a big problem that is to be sorted out,' he said. Since 2020, the Indian real estate market has seen rapid premiumisation, with the share of supply priced below Rs 40 lakh shrinking across key cities and most new launches priced above Rs 80 lakh — driven largely by demand for luxury homes above Rs 1.5 crore. Hiranandani said while the PM Awas Yojana 2.0 will provide interest subsidy for 1 crore homes in urban areas, building affordable housing near city centres is difficult due to rising circle rates. 'How do you match rising land prices and giving affordable housing? It is not possible today with inflation in the cost of construction, the tax rates which are there, stamp duty rate, GST rate, local authority rates, etc. You cannot make affordable housing close to the city centre where employment opportunities exist,' he told The Indian Express, calling for the government and local authorities to intervene. 'No dip in pan-India housing sales' In India's top seven residential markets — Delhi-NCR, Mumbai, Bangalore, Pune, Hyderabad, Chennai, and Kolkata — overall sales dropped by 3.5 per cent year-on-year in 2024. In the first half of 2025, sales fell 24.3 per cent, according to data shared by property consultancy Anarock. Hiranandani said there has been no dip in pan-India housing sales. 'If you look at the national level, real housing growth has been more than 10 per cent (in 2024-25). On an annualised basis, it will go up by more than 15 per cent (this fiscal). So it will probably be one of the highest growth years ever,' he said. Aggam Walia is a Correspondent at The Indian Express, reporting on power, renewables, and mining. His work unpacks intricate ties between corporations, government, and policy, often relying on documents sourced via the RTI Act. Off the beat, he enjoys running through Delhi's parks and forests, walking to places, and cooking pasta. ... Read More
The Hindu
4 minutes ago
- The Hindu
Indian fuel exports escape Trump's tariff net, no Russian penalty yet
India's exports of petroleum products such as diesel and jet fuel to the U.S. continue to be exempted from the levy of any import duty or tariff, and President Donald Trump has, for now, not indicated the penalty he plans to impose to deter New Delhi's energy trade with Russia. On Wednesday, Mr. Trump had announced plans to impose a 25% tariff on India, along with an additional penalty, citing concerns over the country's energy and defence ties with Russia, as well as existing trade barriers. However, the executive order he signed thereafter only gives effect to the 25% tariff on Indian goods coming to the U.S. Even this has an exclusion list that includes finished pharmaceutical products (tablets, injectables and syrups), active pharmaceutical ingredients, electronics and ICT goods (semiconductors, smartphones, SSDs and computers), and petroleum products (crude oil, LNG, refined fuels, electricity and coal). The executive order also does not indicate any penalty that is to be levied for Russian trade. According to official data, India exported 4.86 million tonnes of petroleum products to the U.S. in fiscal year 2024-25 (April 2024 to March 2025) for over $4 billion. Reliance Industries Ltd is the biggest exporter of fuel to the U.S. With fuel exports continuing to be on the exemption list, it means business as usual for India and companies like Reliance, analysts said. Also, a relief would be if no penalty is imposed to punish India for its oil imports from Russia, they said, adding that for now, the U.S. administration has not indicated any penalty. "For now, there is nothing but you never know," an analyst said. From just 0.2% before the Russia-Ukraine war to now accounting for 35-40% of total crude imports, India's reliance on Russian oil has surged — drawing fresh scrutiny with Mr. Trump announcing a penalty on top of a 25% tariff, or tax, on all goods going to the U.S. India historically bought most of its oil from the Middle East, including Iraq and Saudi Arabia. However, things changed when Russia invaded Ukraine in February 2022. India, the world's third-largest crude importer after China and the U.S., began snapping up Russian oil that was available at a discount after some in the West shunned it as a means to punish Moscow for its invasion of Ukraine. From a market share of just 0.2% in India's import basket before the start of the Russia-Ukraine conflict, Russia overtook Iraq and Saudi Arabia to become India's No.1 supplier, with a share as high as 40% at one point of time. This month, Russia supplied 36% of all crude oil, which is converted into fuels like petrol and diesel, that India imported. Announcing the imposition of 25% tariff or tax on all Indian goods going to the U.S., Mr. Trump had said New Delhi "always bought a vast majority of their military equipment from Russia, and are Russia's largest buyer of energy, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE." "India will therefore be paying a tariff of 25%, plus a penalty for the above (Russian purchases), starting on August First," he said in a post on social media. India bought 68,000 barrels per day of crude oil from Russia in January 2022, according to global real-time data and analytics provider Kpler. That month, Indian imports from Iraq were 1.23 million bpd and 883,000 bpd from Saudi Arabia. In June 2022, Russia overtook Iraq to become India's largest oil supplier. That month, it supplied 1.12 million bpd as compared to 993,000 bpd that came from Iraq and 695,000 bpd from Saudi Arabia. Russian imports peaked to 2.15 million bpd in May 2023 and have varied since then, depending on the discount at which the oil was available. But the volumes never slipped below 1.4 million bpd, which is more than what India was buying from its top supplier Iraq before the Russia-Ukraine conflict. In July, imports from Russia averaged 1.8 million bpd, almost double of 950,000 bpd imports from Iraq. Saudi imports stood at 630,000 bpd, according to Kpler. After the Ukraine war, Western energy sanctions against Russia pushed it to cut prices for those buyers still willing to purchase its crude. The discounts on Russia's flagship Urals crude to Brent — the world's most well-known benchmark — were as high as $40 per barrel at one point but have been trimmed since to less than $ 3. G7 countries in December 2022 imposed a $60 per barrel price cap on Russian crude. Under the mechanism, European companies were permitted to transport and insure shipments of Russian oil to third countries as long as it is sold below the capped price — an effort to limit the impact of the sanctions on global oil flows but ensure Russia earns less from the trade. Last month, the European Union decided to lower the price cap to $47.6 and introduced an automatic and dynamic mechanism for its review in the future. The idea is to keep the cap at 15% lower than the average market price. In addition to stoking India's economy, cheap Russian oil gave refiners lucrative business — refining that crude and exporting the products to deficit countries. These included the European Union, which had banned direct crude oil purchases from Russia. This month, the European Union decided to ban the import of refined oil produced from Russian crude.
