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Capital Goods: healthy execution and order wins

ICICIdirect Research 17 Apr 2026 DISCLAIMER

Capital goods companies under our coverage are expected to report a strong set of Q4FY26 results, led by robust execution across both EPC and equipment segments. Within EPC, companies such as Larsen & Toubro, BHEL, KEC International and Kalpataru Projects International are likely to benefit from seasonally strong execution, with Q4 typically contributing ~30–35% of annual revenues driven by milestone-based billing and project closures leading to working capital improvement and better cash flows.

Sector execution is estimated to grow ~12–15% YoY, supported by operating leverage and better project mix, resulting in gradual margin expansion along with a healthy order backlog across power T&D, renewables and hydrocarbons, alongside sustained order inflows during the year.

On the other hand, the Equipment segment is expected to deliver ~14–18% YoY revenue growth, driven by improved execution, operating leverage, and easing global trade headwinds. Companies such as Aeroflex & KSB are likely to benefit from strong domestic demand and export recovery prospects, aided by normalization in US tariff-related uncertainties and progress on EU trade agreements.

Additionally, the auto sector tailwinds with FY26 retail volumes reaching ~2.96 crore units and strong growth in two-wheelers and passenger vehicles are expected to support demand for bearings and precision components, benefiting players like NRB Bearings.

However, exposure to the Middle East remains a key monitorable, particularly for L&T (~39–40% of backlog), KEC (~40%), and Kalpataru (~10–11%). Any disruption in the Gulf region, especially around critical routes like the Strait of Hormuz, could lead to short-term execution delays, supply chain bottlenecks, and freight cost inflation, with management commentary on margins and project continuity being closely tracked.

Stocks Preferred – L&T, ABB

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