What is driving the expected earnings growth for capital goods companies in Q3FY26?

Strong execution, healthy order inflows, and post-monsoon recovery are driving the expected earnings growth.

How are GE Vernova T&D India and Hitachi Energy performing in Q3FY26?

GE Vernova T&D India expects strong order inflows, while Hitachi Energy might see a decline due to a high base from a prior large order.

What is the key factor for the next leg of re-rating in the capital goods sector?

According to PL Capital's Amit Anwani, strong execution will be the key trigger for the sector's next leg of re-rating.

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Capital Goods: Execution is Key to Q3FY26 Earnings Surge

19 Jan

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Summary

Capital goods firms expect stronger sequential earnings in Q3FY26.
Execution momentum will drive mid-teens revenue growth for the sector.
Margin improvements are anticipated, with some exceptions noted.

Capital Goods: Execution is Key to Q3FY26 Earnings Surge

Capital goods companies are poised for stronger sequential earnings in the October-December quarter (Q3FY26). This growth is attributed to a post-monsoon recovery, robust order inflows, and enhanced execution, particularly in high-voltage power and OEM segments. The sector anticipates mid-teens revenue growth, driven by strong order books and healthy industrial demand.

Within the transmission and distribution (T&D) sector, product companies are expected to lead with around 18% growth. GE Vernova T&D India is projected for strong performance, while Siemens Energy and Hitachi Energy anticipate approximately 17% growth, fueled by domestic momentum and execution strength. Project companies are also set for robust 17% average revenue growth.

EBITDA margins are generally expected to improve year-on-year, with GE Vernova projected at 22% due to healthier gross margins and operating leverage. However, ABB India might face a margin decline due to weaker pricing power and currency impacts. The sector's future re-rating hinges on sustained execution and private capital expenditure.