Capital goods sector stocks have given a breakout from their falling channel signalling the end of the short-term corrective phase, according to analysts at ICICI Direct. The brokerage firm added that their bottom-up work also suggests a remarkable improvement in momentum rankings for most companies in the sector augmenting an overall bullish stance. The sector posted a breakout from the 12-year consolidation phase in the middle of 2021 and is now signalling major uptrend over the coming few years. Among the sector constituents, analysts noted that Grindwell Norton, Greaves Cotton, and KSB are three stocks that are favoured by the charts for an up-move.
Greaves Cotton: BUY
Target: Rs 190 | Stop loss: Rs 151
Analysts noted that the share price of Greaves Cotton has generated a breakout above the falling supply line joining highs since January 2022 and signalling the resumption of up move and is now offering a fresh entry opportunity. “Buying demand has emerged in the stock from the support area of Rs 130- 150 as it is the confluence of the term 100 weeks EMA (currently at Rs 147) and the rising demand line support, which has been held on multiple occasions in last 15 months highlighting favourable risk reward set up and a positive price structure,” said ICICI Direct. Analysts expect the stock to continue its current pullback and head towards Rs 190 levels in the coming months.
On the fundamental side, the diversified engineering company has recently received growth capital for its EV business. ICICI Direct said that a transformation strategy to increase E-mobility and new-initiative businesses share will drive long-term growth and help transform and de-risk businesses. The target price of Rs 190 translated to an upside of 14%.
Grindwell Norton: BUY
Target: Rs 290 | Stop loss: Rs 1690
On the charts, Grindwell Norton share price is seen resuming its primary up-trend after the last two quarters of shallow retracement. “Buying demand is seen emerging in the stock after a higher base around the 52 weeks EMA (Currently at Rs 1604) and the 61.8% retracement of the previous major up move (Rs 1161- 2018) The stock is expected to continue soaring higher towards the target of Rs 2090 per share.
In the April-June quarter, Grindwell Norton’s revenue grew by 45.2% YoY to Rs 638 crore, primarily aided by strong performance in the ceramics & plastic and abrasive segment. EBITDA came in at Rs 128.9 crore, grew by 48.2% YoY and PAT grew 46.2% YoY to Rs 92.4 crore. “. Grindwell Norton has net debt free b/s, double-digit return ratios & strong cash generation. We expect revenue, EBITDA to grow at a CAGR of 18.8%, 20.3%, respectively, over FY21-24E,” ICICI Direct said. The target price suggests an upside of 9%.
Target: Rs 1690 | Stop loss: 1370
KSB stock price continues to trend up with a sequence of higher high lows on multiple time frames indicating a strong uptrend. “Past few weeks breather after a life high of 1623 provides an incremental opportunity to own the stock,” analysts said. “On the charts, the current up move since April 2022 is well channelled exhibiting continued elevated demand for the stock. In last three weeks share price held lower band of this up trending channel around Rs 1400 and formed a higher base which remains key support over the medium term,” they added. The stock is now expected to head towards the higher band of rising channel placed around Rs 1700. This would translate to an upside of 13%.