The Hindu Business Line : Investment buying in material handling, mining equipment stocks

The stocks of mining and material handling equipment have been witnessing investment-based buying on the bourses on the back of the Government thrust on infrastructure development in the country.

The growth in core sectors such as power, mining, cement, shipping etc has led to increased demand for material handling and mining equipments. However, research reports maintain that it is the Rs 2.4-trillion anticipated investment in thermal power generation that is expected to create a Rs 25,000-crore opportunity for mining and material handling equipment providers in the next 5-7 years. "Ten per cent of the cost of setting up of new thermal power plant is material handling equipment. We expect order book growth to follow the capex plans of the mining and power sector," said an analyst tracking the sector.

The rising demand for coal handling equipment from thermal power generation companies will benefit companies such as Elecon Engineering, TRF Ltd (Tata Robin Fraser), Mcnally Bharat etc.

Increased mining activity at Coal India coupled with replacement demand for aged heavy engineering and mining machinery is expected to boost demand for mining equipment. This will benefit companies such as BEML, Revathi Equipment, Eimco Elecon, Atlas Copco etc.

As per a report by a leading domestic brokerage, the growth triggers for this sector will primarily be the Rs 13,000-crore opportunity on account of the Rs 22,000-crore capex of Coal India. Additionally, there is the average annual replacement demand of Rs 1,250 crore at Coal India.

However, there is some concern about input cost pressure. "This will most likely come in from steel and iron ore. Then there are the huge order books. One needs to ask if these companies will be able to deliver on time," questioned the business advisory head of a reputed domestic brokerage.

Elecon Engineering is quoting at Rs 1215.45, TRF Ltd at Rs 394.35 while BEML closed at Rs 1,258.25 and Revathi Equipment at Rs 708.75 on the BSE.