Thursday 20 November 2008

Reliance Money positive on Capital Goods sector

Reliance Money Capital maintains a positive view on the Capital Goods & Engineering sector in the long term but the outlook for the next quarter looks challening considering the slowdown see in the economy.

Key Sector trends:-

Large capital goods companies continued to grow, order book momentum also maintained. However incremental orders could take a hit and current
order book execution in the light of any order cancellation pose immediate risks to the sector
Margins have taken a hit due to sharp rise in raw material prices
Outlook on power equipment companies is positive due to strong capex in power sector
Outlook

Going ahead for the H2 of FY09E, we expect slower growth in the incremental orderflows to capital goods and engineering company, more importantly with a sharpdownturn, in IIP nos expectation next couple of months coupled with seasonal margin pressure seen in user sector, we believe valuation of capital goods player to get aligned with broad markets. We continue to maintain a positive view on the sector in the long term but the outlook for the next quarter looks challening considering the slowdown see in the economy.

Recommendations:-

Sell- Cummins India, Kirloskar Oil.
Buy- Jyoti Structures.
Hold- Thermax, KEC Int Ltd, Kalpataru Power.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source: Moneycontrol

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