ABB, Siemens, Crompton Greaves, Larsen & Toubro, Gammon India, IVRCL Infrastructure, Hindustan Construction, Kirloskar Brothers and Praj Industries: these are some of the more prominent stocks from the engineering and construction sector that have been star performers in the bullish markets since July 2003.
The bullish undertone could well be maintained, as the Budget has been positive for these sectors.
The reduction in tariffs on capital goods, the correction of the inverted duty structures and the lowering of tariffs on non-ferrous metals are bound to be an across-the-board positive for the engineering sector. The infrastructure push - the setting up of a special purpose vehicle may be added pep is likely to open up revenue growth opportunities that could span several years. A healthy addition to an already robust order book position is on the cards. Here are the thrust areas that could prime growth for engineering/construction companies:
Outside of the Golden Quadrilateral and N-S-E-W corridor projects, a third major national highways plan has been announced to cover roadways not connected by the other two. This is likely to be positive for the likes of L & T, Nagarjuna Construction and Hindustan Construction.
Players in the distribution and transmission businesses such as ABB, Siemens, Jyoti Structures, KEC International and Crompton Greaves are bound to be beneficiaries.
Voltas may be a beneficiary as it trades in imported machinery; but the upside is not likely to be significant in the context of the growth across its other businesses.
There may be resistance in the initial days, but this is likely to become an integral part of pricing, as have other services taxes. The likes of Ansal Housing, Mahindra Gesco and Unitech are unlikely to be affected. Companies such as ABB, Siemens, Alfa Laval and Sesa Goa (which is in the business mining and exporting iron ores) are likely to receive a boost to earnings from the reduction in corporate income-tax rates.
S. Vaidya Nathan