Looking for Q2 earnings winners: We expect Voltas (+21% y-o-y), CGCrompton Greaves-- (+23% y-o-y), and ABB India (+31% y-o-y) to have performed well during Q2 earnings, while Cummins India (-14% y-o-y), Siemens India (-9% y-o-y), and Thermax India (-7% y-o-y) to report weak earnings. We expect L&T to report 5% y-o-y standalone earnings growth, with recurring consolidated earnings growth at 4% sequentially.
We prefer infra exposure over industrial capex: We continue to expect a cyclical recovery over the next 12 months, although the early part of the recovery likely will be driven by the infrastructure sector, while industrial capex catches up with a 12-18-month lag. Hence, our investment outlook favours players focussed on infrastructure development (ex-power); we steer clear of companies focussed on industrial capex, as low utilisation levels will likely continue to delay fresh capex.
We rate L&T OW and Voltas OW(V) (Overweight with volatility) . L&T ticks both the infra and domestic long-cycle manufacturing revival boxes thereby improving our earnings visibility. Voltas, on the other hand, should stage a turnaround in its Middle East business, as well as benefit from consumer discretionary spend increases in its domestic air conditioning business.