Capital goods companies are seeing steady growth. Order inflows have picked up across infrastructure, power and industrial segments. The focus has now shifted to execution. Growth will depend more on delivery and margins than on fresh order announcements.
A recent report by CNBC-TV18 flagged this clearly. It pointed out that while the capex cycle remains supportive, execution is emerging as the key differentiator. Companies that deliver on time and manage costs well are pulling ahead. Those struggling with execution are falling behind, despite having large order books.
This makes it the right time to revisit the sector. Earnings recovery is now visible in reported numbers, not just in management commentary. Return ratios are improving for several players. At the same time, stock prices have already moved up, pricing in much of this recovery.
This article looks at four capital goods companies where earnings recovery is backed by execution-led growth and balance-sheet strength. Profitability has improved due to steady order inflows, better margins and rising return ratios. This shows the recovery is flowing into cash generation and capital efficiency.
Valuations, however, are no longer cheap and are above long-term averages. Other companies were left out due to uneven execution, weaker cash flows, higher dependence on government ordering, or valuations that have moved far ahead of fundamentals.
#1 Larsen & Toubro: Massive Order Book vs. Execution Lag
Larsen & Toubro (L&T) is a multinational conglomerate which is primarily engaged in providing engineering, procurement and construction (EPC) solutions in key sectors such as infrastructure, hydrocarbon, power, process industries and defence, information technology, and financial services in domestic and international markets.
Larsen & Toubro reported a steady Q2 FY26, with execution holding up across most businesses.
Consolidated revenue grew 10% year-on-year (YoY) to Rs 67,984 crore, while net profit rose 16% to Rs 4,687 crore, supported by higher project activity and treasury gains.
Order inflows remained strong, increasing 45% from last year. This pushed the order book to Rs 6.7 trillion, with international projects, largely from the Middle East, accounting for a significant share.
During the quarter, growth was driven by large hydrocarbon EPC orders, better private-sector infrastructure demand and higher activity in hi-tech manufacturing.
The company also expanded its presence in new areas. It entered partnerships in renewables, green ammonia, defence and semiconductors, including a green ammonia project at Kandla and the acquisition of power module design assets in Japan.
Infrastructure execution was uneven due to prolonged monsoons and slower payments in some segments, though margins improved slightly. Management maintained its FY26 revenue growth guidance of 15% and expects execution to improve in the second half, backed by a strong pipeline and tighter control over working capital.
In the past year, Larsen Toubro’s share price is up 7%
Larsen Toubro 1 Year Share Price Chart
#2 Siemens: Rail & Infra Strength Offsets Digital Slump
Siemens offers products and integrated solutions for industrial applications. It serves various manufacturing industries and provides drives for process industries. The company also focuses on intelligent infrastructure and smart buildings. It works on efficient and clean power generation from fossil fuels and for oil & gas applications.
The company follows an October-September year as a financial year. Siemens delivered a steady showing for the Q4 FY25, with growth driven mainly by its infrastructure and rail businesses. Total Revenue for the quarter stood at Rs 5,171 crore, up 16% YoY.
While net profit on the other hand stood at Rs 485 crore stood lower than Rs 831 crore as compared to Q4 FY24.
The Digital Industries segment saw a return to more normal growth after a volatile period, which weighed on overall profit growth. Earnings were also impacted by costs related to the energy business demerger.
Order intake rose 21% from a year ago to Rs 20,000 crore.
The company continued to invest in expanding its local manufacturing base.
Siemens announced a Rs 330 crore investment in gas-insulated switchgear and vacuum interrupter facilities in Goa, aimed at both domestic demand and exports.
In the Mobility business, execution picked up with the delivery of the first 9,000 HP locomotive.
Work on the Ahmedabad–Mumbai high-speed rail signaling project is progressing as planned. Exports of rail bogies and components are also increasing.
Management said the focus remains on solution-led growth, higher localisation and tight execution. The company expects these priorities to support margins as private-sector capex gradually improves.
In the past year, Siemens’ share price is down 8%.
Siemens – 1 Year Share Price Chart
#3 ABB India: Automation Wins Sustain Margins Amid Slowdown
ABB India is an integrated power equipment manufacturer supplying the complete range of engineering, products, solutions and services in areas of automation and power technology.
ABB India, which follows a calendar-year financial cycle, reported a steady but uneven performance in the July–September quarter of CY2025.
Revenue for Q3 FY26 rose 14% YoY, to Rs 3,311 crore supported by stronger execution in the Electrification and Motion segments. Base orders increased 13%, suggesting demand remained healthy across core industrial customers.
Net profit, however, fell from Rs 440 crore to Rs 409 crore reported a year ago. Margins were pressured by a weaker product mix, higher competition and the impact of quality control order norms, which led to higher imports in certain product categories.
The order backlog stood at around Rs 9,900 crore at the end of the quarter, providing reasonable revenue visibility.
Demand continued from renewables, buildings, data centres, electronics manufacturing and EV-related automation.
During the period, the company also implemented digital solutions for gas distribution networks and introduced new high-efficiency motors aimed at reducing energy consumption.
Management said demand conditions remain stable, though project decisions are moving slowly, and expects execution to stay steady as the capital expenditure cycle gradually settles.
In the past one year ABB India’s share price tumbled 25.8%.
ABB India 1 Year Share Price Chart
#4 Cummins India: Data Center Boom Fuels Profit Growth
Cummins India is a part of the Cummins Inc. Group USA. It designs, manufactures, distributes and services diesel and alternative fuel engines from 2.8 to 100 litres, diesel and alternative-fuelled power generator sets of up to 3000 kilo watt, as well as related components and technology.
Cummins India, reported a strong September quarter in FY26, led by power generation demand.
Revenue rose 28% YoY to Rs 3,122 crore. Profit after tax increased 38% to Rs 622 crore, helped by higher volumes and better operating leverage. Domestic sales grew 28%, while exports were up 24%, mainly driven by Europe and the Middle East.
Power generation was the biggest contributor. Segment revenue grew 49% from a year ago. Data-center projects made up around 40% of power-generation sales during the quarter, supported by faster execution after site clearances.
Excluding data centers, power-generation growth was about 20%. Industrial sales declined due to extended monsoons and slower activity in construction and mining. Rail-related demand remained steady.
The company kept its double-digit revenue growth guidance for FY26. Management said data-center orders tend to be uneven and warned that growth could moderate in the second half, as competition increases and export demand shows early signs of softening.
In the past one year Cummins India’s share price has rallied 36.1%.
Cummins India 1 Year Share Price Chart
Valuations
Let’s now turn to the valuations of the companies in focus, using the Enterprise Value to EBITDA multiple as a yardstick.
Valuations of Companies in focus
| Sr No | Company | EV/EBITDA Ratio | 3 Year Median EV/EBITDA | ROCE |
| 1 | Larsen Toubro | 16.1 | 15.4 | 14.5% |
| 2 | Siemens (india) | 37.5 | 27.1 | 15.8% |
| 3 | ABB India | 37.4 | 61.7 | 38.6% |
| 4 | Cummins India | 33.4 | 27.4 | 36.3% |
The table shows that three of the four companies are trading at or above their recent historical levels. Larsen & Toubro is valued close to its three-year median, which broadly reflects its steady execution and average return profile. ABB India on the other hand is trading at a discount to its 3 year median.
Siemens and Cummins India are trading well above their historical medians, indicating that the market has already priced in much of the expected earnings recovery.
ABB India looks different. While its current multiple remains high in absolute terms, it is below its three-year median and is supported by a sharp rise in Return on Capital Employed (ROCE) to nearly 39%. The sector has seen a clear re-rating in recent years even as balance sheets have improved and execution risks have eased.
While this supports higher valuations, investors need to pause and ask how much future growth is already reflected in current prices. In capital goods, valuation comfort becomes important once earnings recovery is widely recognised.
Conclusion
The earnings pickup in capital goods companies is now visible in reported numbers. Execution has improved and balance sheets are in a healthier position. Return ratios have moved up, showing that this phase is different from the earlier period of weak delivery and financial stress.
The market has already taken note of this change. Stock prices have gone up over time, and current valuations show confidence in the ongoing capex cycle. There is limited margin for disappointment at current levels.
From here, companies will need to deliver consistently. Project execution has to stay on track. Margins and cash flows also need to remain stable. Any delay or pressure on costs could affect market confidence.
The sector continues to have a supportive medium-term outlook. However, much of the recovery is already reflected in stock prices. Investors may therefore need to be selective and pay closer attention to valuations rather than rely on momentum alone.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Ekta Sonecha Desai has a passion for writing and a deep interest in the equity markets. Combined with an analytical approach, she likes to deep into the world of companies, studying their performance, and uncovering insights that bring value to her readers.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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