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Bullish +75

L&T, ABB, Cummins: Jefferies positive on industrial stocks; expects firms' operating leverage to be better than expected

AI-generated analysis

📈 Jefferies analysts maintain a positive outlook on the Indian industrial sector, predicting operating leverage will exceed expectations in 2024.

💰 Larsen & Toubro (L&T) recorded its highest-ever order inflow, with the total order book reaching Rs 4.50 lakh crore as of September 30, 2023.

📊 Cummins led revenue growth in FY23 H1 with a 47% year-over-year increase, followed by ABB India and L&T at 26%.

🏭 The brokerage expects industrial firms to benefit from robust capital expenditure cycles from both public and private sectors.

🇮🇳 Companies are anticipated to focus on indigenisation efforts while maintaining a strong order book across the sector.

⚠️ Jefferies notes that the upcoming Union Budget may signal a slowdown in government capex, which could pose a risk to the sector.

📉 L&T shares have gained over 64% this year, significantly outperforming Cummins which saw muted returns of just 0.06%.

🚀 ABB India shares have surged over 78% annually, while BEL has seen an impressive increase of over 82%.

💼 Jefferies upgraded L&T with a new target price of Rs 4,200 and maintained a Buy rating for the stock.

🔋 Siemens received a Buy rating from Jefferies with a new target price of Rs 5,000 compared to no prior target.

⚡ ABB India's order book is valued at Rs 10,028 crore, representing a 14% year-over-year increase.

🏭 Siemens' order book stands at Rs 45,518 crore with an order inflow of Rs 4,498 crore in the recent period.

⚙️ Thermax has an order book worth Rs 1,973 crore and an order balance of Rs 10,264 crore according to recent data.

📈 Cummins' new target price is set at Rs 1,600 by Jefferies, reflecting a positive view on the company's performance.

🏭 BEL received a Buy rating with a new target price of Rs 220, up from the previous target of Rs 165.

📉 Thermax shares have gained over 64% in the year, aligning with the broader industrial sector's strong performance.

🔧 The brokerage highlights that the order book for Siemens increased by 12% year-over-year during the recent period.

💡 Jefferies believes the industrial sector will continue to benefit from a favorable capital expenditure environment.

📉 Cummins shares underperformed the Nifty 50's rise of over 18% with only 0.06% gain despite strong revenue growth.

🏭 The total order book for L&T grew by 22% year-over-year and order inflow increased by 72% in the same period.

Bullish Signals
  • Jefferies has upgraded its outlook for industrial stocks, specifically highlighting L&T, ABB India, Cummins, Siemens, Thermax, and BEL with 'Buy' ratings.
  • The brokerage expects the industrial sector's operating leverage to be better than expected in 2024, driven by a robust capital expenditure cycle from both PSU and private sectors.
  • L&T recorded its highest-ever order inflow in company history, with total orders at Rs 4.50 lakh crore representing a 72% year-on-year increase in order inflow.
  • ABB India's order book grew by 14% YoY to reach Rs 10,028 crore, while Siemens saw a 12% increase in order inflow to Rs 4,498 crore.
  • Thermax maintains a strong order book of Rs 1,973 crore with an order balance of Rs 10,264 crore, indicating sustained demand visibility.
  • L&T shares have gained over 64% in the year, while ABB India has surged over 78%, significantly outperforming broader market indices.
  • Siemens shares have risen over 43%, and BEL has seen an impressive increase of over 82% against the Nifty 50's rise of 18%.
Risk Factors
  • Jefferies acknowledges a potential risk regarding a slowdown in government capital expenditure signaled by the upcoming Union Budget.
Full Analysis
Jefferies has issued a positive outlook on the Indian industrial sector, specifically highlighting Larsen & Toubro (L&T), ABB India, Cummins, Siemens, and Thermax. The brokerage expects these firms to demonstrate operating leverage that exceeds market expectations in 2024, driven by a robust capital expenditure cycle from both public and private sectors. Additionally, the analysis notes a strong order book across the sector and a strategic focus on indigenisation as key growth drivers. L&T is noted for recording its highest-ever order inflow, with a total order book of Rs 4.50 lakh crore as of September 30, 2023, representing a 22% year-on-year increase in the order book and a significant 72% surge in order inflow. Other companies also show strong order books, including ABB India at Rs 10,028 crore (up 14%), Siemens at Rs 45,518 crore, and Thermax at Rs 1,973 crore. The brokerage cites FY23 H1 revenue growth figures for Cummins (47%), ABB India (26%), L&T (26%), Siemens (19%), and Thermax (14%) as evidence of the sector's healthy earnings trajectory. Jefferies has upgraded its ratings on these stocks, maintaining a 'Buy' recommendation with new price targets of Rs 4,200 for L&T, Rs 6,085 for ABB India, Rs 5,000 for Siemens, Rs 4,130 for Thermax, and Rs 1,600 for Cummins. The report acknowledges a potential risk regarding a slowdown in government capital expenditure signaled by the upcoming Union Budget but maintains that the overall sector fundamentals remain strong.