Engineering, Cap Good & Infrastructure - At Crossroads…:: emkay

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Engineering, Cap Good & Infrastructure

At Crossroads…

n     ECI sector witnessed marginal earnings changes for FY11E (up 4.9% since Jun’09) and FY12E (down 0.5% since Mar’10)

n     ECI sector’s current valuations imply resumption of capex spends - Non-resumption could trigger upto 20% de-rating in valuations

n     At 14.1X PER, BHEL has best risk-to-reward (15% lower than Lehman crisis). L&T, Voltas and Greaves Cotton also attractive - being 11-37% lower than FY04-08 cycle

n     Cummins and Crompton Greaves have large downside risks, highly susceptible to negative surprises