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Nomura Identifies Top Capital Goods Stock Picks for FY26 Q1

Strategic Insights

— 2 min read

Nomura's latest report for the first quarter of FY26 highlights select segments in the capital goods sector, including power transmission and distribution, defence electronics, and buildings & factories (B&F), which are expected to drive growth. Despite a decline in order inflows for the overall coverage universe, the brokerage sees strength in companies such as Bharat Electronic, KEC International, and Hindustan Aeronautics. These companies are expected to post significant growth in order inflows, driven by specific wins and traction in key segments.

Key Takeaways:

  • Bharat Electronic is expected to clock a 48% YoY rise in order inflows to Rs 7,350 crore, driven by the signing of missed orders worth Rs 6,000 crore in April 2025.
  • KEC International is expected to post strong inflow growth of 33% YoY, driven by traction in both its power transmission and distribution, and Buildings & Factories (B&F) segments.
  • Short-cycle capital goods players like ABB and Siemens are expected to show moderate growth, with Nomura projecting 9% and 10% YoY rise in order inflows, respectively.
  • CGI Power is likely to report a 17% jump in inflows, buoyed by a Rs 641 crore transformer package order from Power Grid Corporation of India.
  • Afcons is expected to see muted order inflows of Rs 1,300 crore, down 7% quarter-on-quarter.
  • A broader capex recovery still seems distant, despite sector-specific wins, with corporate India continuing to exhibit caution and hesitancy in undertaking fresh capex.
  • The Business Expectations Index (BEI) for Q2FY26, at 117.5, is the lowest in four years.
  • L&T is expected to clock 18.5% YoY growth in its core business execution, led by the hydrocarbon and hi-tech manufacturing verticals.
  • Bharat Electronics and Hindustan Aeronautics are likely to report Rs 4,800 crore in revenue for Q1FY26, marking 15% and 11% growth, respectively.
  • KEC International's revenue may rise 12.5% YoY, powered by T&D and B&F segments.
  • CG Power and ABB are expected to report revenue growth of 23% and 10%, respectively.

Statistics:

  • Order inflows for the overall coverage universe slipped by 5% YoY to Rs 92,000 crore.
  • New investment announcements surged 42% YoY to Rs 3.6 trillion in Q1FY26.
  • The Business Expectations Index (BEI) for Q2FY26 is 117.5, the lowest in four years.
  • L&T's core business execution is expected to grow 18.5% YoY.
  • Bharat Electronics and Hindustan Aeronautics are expected to report Rs 4,800 crore in revenue for Q1FY26.
  • KEC International's revenue may rise 12.5% YoY.
  • CG Power and ABB are expected to report revenue growth of 23% and 10%, respectively.

Sources:

  • Nomura's report for FY26 Q1
  • CMIE data
  • IE Online Media Services Pvt. Ltd. (Copyright 2025)

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