Capital Goods & Power - Q2FY21 Result Preview - ICICI Securities

Q2FY21E is likely to be soft for the capital goods universe in terms of order inflows while execution may improve sequentially as we expect execution revival with workers gradually returning across sites reaching ~80-90% of pre-Covid levels during the quarter amid unlock measure. Larsen & Toubro (L&T) has announced orders ranging at Rs. 8500-20000 crore (ex-services) across construction, water effluent, heavy civil infrastructure and defence segments but is expected to see a revival in tendering pipeline from Q3FY21 onwards. Key risks remain project delays/deferrals amid domestic slowdown and less-than-expected conversion of the tendering pipeline.

Moderate performance expected among EPC companies...

Overall, EPC companies are expected to post a moderate performance as execution is likely to rebound amid gradual unlock measures by the government to open-up the economy. Power T&D company, KEC, is expected to report revenue, EBITDA, PAT growth of 2.4%, -6.1%, -8.8% YoY, respectively, aided by execution revival in key markets. L&T (standalone, ex-E&A) is likely to report a revival in performance with revenue expected to decline 19.5% YoY to Rs. 15102.3 crore, EBITDA expected to decline 22.2% to Rs. 1208.2 crore and adjusted PAT expected to decline 50.7% at Rs. 977.7 crore impacted by higher other income and tax adjustment in base quarter. Thermax' revenue, EBITDA are expected to de-grow 25.8%, 67.1%, respectively, impacted by execution and supply chain disruptions. On the defence front, BEL is expected to report a revenue decline of 8.8% to Rs. 2501.5 crore while PAT is expected to de-grow 43.5% to Rs. 191.9 crore YoY. Cochin Shipyard is expected to report revenue, EBITDA decline of 12.1, 17.8% YoY, respectively, owing to moderate execution in shipbuilding and ship repair activities.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_CapitalGoods_Q2FY21.pdf

Source : Equity Bulls

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