Capital goods sector in a tight spot: Mayuresh Joshi, Angel Broking

In a chat with ET Now, Mayuresh Joshi – VP, Institution, Angel Broking, shares his views on capital goods sector. Excerpts:

ET Now: What about BHEL, disappointing numbers following L&T in the line of disappointing industrial results, how do you think the stock behaves?

Mayuresh Joshi: Clearly a disappointing set of numbers as far as BHEL is concerned and this is what we have been maintaining for some length of time. The entire capital goods sector specifically if you talk about BHEL and BTG segment, it has not been doing well. It has been bereft of orders and if you look at the overall order book for the sector, the revenue visibility is around 2-2.4 times of sales, so it is not encouraging sign with orders just tripling through on marginal basis.

Even on the international side of things, outside BHEL, you have seen a lot of hydrocarbon orders specifically for L&T to go sour, negative EBITDA margins of around 4.8, so in that sense itself, the capital goods sector seems to be in a tight spot and again on all parameters, BHEL has probably disappointed.

So, the order book is not growing in substantial manner. There are slow moving orders, probably execution still remains an issue and for an uptick to probably happen, EBITDA margin will take time. one really has to be stock specific. However, if I can club between capital goods/infrastructure, L&T still remains our preferred pick and L&T probably looks a best bet in terms of infra push from the government as well as expected numbers to come through.