Revenue growth in the quarter recorded a moderate ~11% year-on-year increase, reflecting mixed execution trends across companies, with stronger performance in transmission, renewables and select defense players versus subdued growth among private capex-oriented segments. Despite this, profit after tax (PAT) broadly exceeded expectations, highlighting operational resilience amid uneven topline momentum.
Importantly, order inflows remained healthy, driven by a diversified pipeline spanning domestic infrastructure, Middle Eastern projects, power-T&D and data centers. Public capex continued to be a dominant demand driver; the latest Union Budget raised capital expenditure allocations by an estimated 11% for FY27, with defense outlays up nearly 18%, enhancing visibility for large-ticket project awards over the next few years. Accumulated approvals worth nearly ₹6.9 trillion are expected to convert into firm contracts, supporting backlog expansion.
Private sector capex, while still selective, showed pockets of resilience in metals, automotive and cement segments. Export prospects have gained traction following recent India-US and India-EU trade agreements, lifting equipment demand especially for data center and renewable infrastructure overseas.
Margins expanded on a year-on-year basis to ~13.1%, driven by operating leverage and favorable mix shifts, despite headwinds from sharper commodity price movements. Hedging strategies and contractual price-escalation provisions helped mitigate near-term cost pressures, with companies largely expected to pass through incremental input costs with a short lag.
Capacity additions continue in critical areas such as transformers, HVDC systems, power generation and rail manufacturing, reflecting sustained demand visibility. While some segments face timing delays in international order finalizations and slower private capex pick-up, the broader structural opportunity remains intact.
Limited near-term competitive pressure from international entrants — notably China — underpins pricing stability for domestic players.Looking ahead, growth in public investment, strengthening export pipelines and secular demand from energy transition and digital infrastructure are poised to sustain capital goods sector momentum.
Key monitorables include acceleration in tendering activity, conversion of large strategic orders, broader private capex revival and continued export expansion.
Siemens Energy: Buy| Target Rs 3600
Siemens Energy (ENRIN) is structurally positioned to benefit from India’s power transmission capex cycle, supported by a sharp rise in transformation capacity needs and a strong export opportunity.
Capacity additions in transformers and high-voltage switchgear enhance its ability to address both domestic and global demand. Management notes that any entry by Chinese players would require local capacity setup and certifications, limiting immediate industry disruption.
In Q3FY26, Revenue grew 26% YOY, while EBITDA margin expanded 200bp YoY to 24.1%, aided by lower other expenses. Strong margins and higher other income led to 57% YoY PAT growth. Order backlog rose 38% YoY, providing healthy revenue visibility. With capacity expansions coming on stream by FY27, operating leverage and export mix should support profitability.
We expect revenue/EBITDA/PAT CAGR of 27%/30%/32% over FY25-28E, led by robust transmission growth and steady generation recovery.
Kirloskar Oil Engines: Buy| Target Rs 1600
KOEL continues to gain share across LHP and HHP powergen, supported by capability building and consultant-led selling. Ramp-up in nuclear and defense orders, CPCB 4+ renewals, and export expansion provide multi-year visibility.
B2C transfer sharpens focus on a higher-margin B2B portfolio. On restated numbers, 3QFY26 revenue grew 35% YoY to INR13.8b, led by powergen (+44%) and industrial (+41%). EBITDA margin stood at 12.2%, impacted sequentially by higher other expenses. Adjusted PAT was INR1,022m.
9MFY26 revenue/EBITDA/PAT grew 16%/17%/15%. We model FY25–28 revenue CAGR of 15% with EBITDA/PAT CAGR of 19%/21%, supported by product mix improvement and operating leverage. Margins are expected to improve to ~14–14.5% by FY27/28.
(The author is Siddhartha Khemka, Head of Research – Wealth Management, Motilal Oswal Financial Services)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)