IIFL Institutional Equities positive on consumer electrical space; expect double-digit growth

Renu Baid of IIFL Institutional Equities sharing her expectations from the consumer durable space this earnings season said, “We are positive on the consumer electrical space. The underlying growth in that market is fairly strong. So, companies should be reporting double digit growth, comfortably around 15 percent.“

With regards to capital goods space, she said Larsen and Toubro (L&T) has been quite a mix bag of results so far. "On the inflow side, there could be a bit of weakness, which is a reflection of how the end markets have been. The overall order flow from the government sector too has been a bit soft, so after two strong quarters of inflows, we will see them moderating out this quarter," she said.

"For the core orders, excluding services, we are expecting a strong double digit decline of 25 percent. While Inflows will be a bit challenging for them, we are expecting double digit growth in infra business that is around 13 percent plus. Margins too are expected to start looking northwards now - relatively better than compared to last year,” she further added, in an interview with CNBC-TV18.

Talking about order flows in the transmission and distribution (T&D) equipment space, she said they have improved in the last couple of quarters helped by the green energy orders but compared to last year’s base they would be still be soft, " she said.

From an earnings perspective or order inflow perspective, for the private sector driven companies like ABB, Siemens, Thermax revenue headwinds will continue, as reflection of orders and the uncertainties that are there on the working capital and the credit offtake. Therefore, companies are expected to be a bit more conservative in terms of revenue execution to ensure that the working capital and the balancesheet are intact,  she said, adding that in another three-four months, recovery would probably kick in.

“In terms of execution, L&T should be doing well. The house is also upbeat on  KEC, the midcap EPC space but Cummins remains their top pick this year," said Baid.

Broadly, she said we seem to have hit the bottom in terms of domestic power generation and exports for them. We see sequential improvement in terms of business outlook with good valuations,” she said.