Jefferies report highlights strong growth and positive trends in Indian industrials sector

In the latest report on Indian industrials, Jefferies provides a comprehensive overview of the sector, pointing to several key indicators that signal robust performance and positive trends.

The second quarter of FY24 saw a remarkable surge in order flows, witnessing a substantial 67% year-on-year (YoY) increase. Notably, Larsen & Toubro (L&T) emerged as a frontrunner, contributing significantly to this growth with an impressive 72% YoY expansion.

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Jefferies notes a noteworthy 256 basis points (bps) year-on-year margin expansion for major players such as ABB, Siemens, and Thermax in Q2. This expansion is attributed to operational leverage, reflecting efficiency gains in their business operations.

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Industrial stocks in Jefferies’ universe have exhibited notable outperformance compared to the Nifty index over both one- and two-year periods. This trend underscores the resilience and strength of the industrial sector in the Indian market.

The report maintains a positive outlook, projecting a 16% compound annual growth rate (CAGR) in infra+ industrial capital expenditure (capex) from FY23 to FY26. This anticipated growth is a substantial uptick compared to the 6% CAGR observed in the period from FY11 to FY20.

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Jefferies identifies key players as top picks for investors in the Indian industrials sector. These include Larsen & Toubro (L&T), Siemens, Thermax, and KEI. The selection is based on their performance, growth potential, and overall market positioning.

As the industrial landscape in India continues to evolve, Jefferies’ report signals optimism and confidence in the sector’s growth trajectory. The positive trends in order flows, margin expansion, and overall market outperformance provide valuable insights for investors navigating the dynamic landscape of Indian industrials.

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