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

The industrial sector companies witnessed a good run in 2023, as most companies saw healthy earnings growth. Global brokerage Jefferies, while analysing the industrial sector companies' performance for 2024, has said that the sector's operating leverage will be better than expected this year.

Companies' revenue growth in FY23 H1 (YoY)

Further, the brokerage believes that industrial sector companies will benefit from a good capital expenditure cycle from both public sector undertakings (PSU) and private sectors. Additionally, it expects the companies to focus on indigenisation. It also noted that the sector's order book looks strong.

According to Zee Business Research, Larsen and Toubro (L&T) has recorded the highest-ever order inflow in the history of the company. The total order book is at Rs 4.50 lakh crore as of September 30, 2023, which is a growth of 22 per cent in total order book year-on-year (YoY) and a 72 per cent increase in order inflow (YoY).

ABB India's order book is worth Rs 10,028 crore, which is a YoY increase of 14 per cent. Siemens' order book stood at Rs 45,518 crore with an order inflow of Rs 4,498 crore, a 12 per cent increase YoY. 

Lastly, the order book of Thermax is worth Rs 1,973 crore with an order balance of Rs 10,264 crore.

The brokerage also said that the upcoming Union Budget is signalling some slowdown in government capex, which can be a risk.

Jefferies recommends the following industrial stocks:

Industrial stocks share price performance

In a year, L&T shares have gained over 64 per cent, ABB India over 78 per cent, Siemens over 43 per cent, Thermax over 64 per cent, BEL has increased over 82 per cent and Cummins shares have given muted returns of 0.06 per cent against the Nifty 50's rise of over 18 per cent.

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