Motilal Oswal has placed its bets on key capital goods stocks. According to a latest report, Bharat Electronics remains its top sector pick, while other select players like Larsen & Toubro (L&T), Cummins India and Siemens Energy continue to find space in the brokerage’s preferred list.
Motilal Oswal’s top picks in the capital goods space
While valuations in the sector remain stretched, the brokerage house believes selective bets can still deliver. “The sector is positioned at a juncture where valuation re-rating is difficult from current levels, while the growth-oriented stocks will continue to remain on the investment radar,” the brokerage added.
Its top picks include:
Bharat Electronics – It is also the top defence pick
Larsen & Toubro, Cummins India and Siemens Energy – preferred in large-cap industrial space
Kirloskar Oil Engines and Kalpataru Projects International – mid- and small-cap names with strong momentum
The brokerage added, “Stocks in key themes such as T&D, renewable, and defence remain preferred bets, while pure capex-oriented stocks are experiencing delays in order finalisations.”
Motilal Oswal on capital goods: Strong earning momentum
Motilal Oswal pointed out that the sector has reported a strong profitability in the June quarter.
“In Q1FY26, the aggregate revenue growth of our coverage universe stood at 15% YoY, and with broadly stable margin performance, the capital goods sector delivered a stronger-than-expected PAT performance,” the brokerage noted.
Big names like L&T, Cummins, and Kalpataru Projects International reported strong execution, while defence players such as Bharat Electronics and Hindustan Aeronautics also delivered. However, margin pressures were visible in Siemens Energy and ABB.
“Executions for ABB and Siemens were in line with our expectations, though lower-than-expected margins weighed on PAT,” Motilal Oswal added.
Motilal Oswal on capital goods: Order inflows driven by defence, renewables, and T&D
One of the biggest drivers for the sector has been the healthy order pipeline across power transmission, defence, and renewables.
“Overall, inflows of EPC companies jumped 28% YoY, mainly driven by Larsen & Toubro and Kalpataru Projects International,” said the brokerage.
While private sector capex remains sluggish, government-led demand is keeping the sector active. Defense remains a key focus.
“We believe that the Indian defense ordering pipeline will remain strong in the near term on account of emergency procurement, as well as for the medium-to-long term, led by both base and large-sized orders,” the report highlighted.
Motilal Oswal on capital goods: Export revival adds to the growth story
Beyond domestic demand, exports are also helping capital goods companies. According to Motilal Oswal, “Export performance has improved for companies across the product as well as the EPC segments.”
L&T, for instance, now generates over half its revenue from international markets. “LT’s international revenue accounted for 52% of total revenue,” the report mentioned, adding that Kalpataru Projects International and KEC also saw strong overseas order books.
Not all companies had it easy though. “Triveni Turbine’s export inflows were weak during the quarter due to geopolitical issues and deferral of decision-making from international clients,” the brokerage noted.