Capital Goods Sector Analysis - Poised for growth | Q1FY26

India’s IIP slowed to a 9-month low of 1.2% in May 2025, signalling broader economic headwinds. Yet, capital goods sector remain a contrarian bet as it registered strong growth of 14.0% YoY in April 2025 helped by a low base effect, followed by a similar 14.1% YoY growth in May 2025 indicating sustained demand. While this growth is mainly driven by the capex at the central and state government levels, we are yet to see credible trend of private sector participation. Nevertheless, we believe some stocks that has secular trends will continue to perform well despite all the market noise. From our coverage of cap goods stocks, we are positive on Anup Engineering and ESAB India, and advise add on dips for KSB and Kirloskar Pneumatic.

Companies under our coverage from Capital Goods sector:

KSB India:

KSB is expected to post 15% YoY growth in revenue, EBITDA, and PAT in Q2CY25, with stable profit margins compared to Q2CY24. Key order wins during the quarter include: (i) 15 boiler feed pump sets for NTPC’s Gadarwara-II and Nabinagar-II supercritical TPPs (an estimated ~Rs 2,000 mn), (ii) an export order for 8 Critical Safety Class 2 pumps for nuclear power plants (an estimated ~Rs 550 mn), and (iii) solar water pumps under the PM-KUSUM scheme (~Rs 250 mn). The company also anticipates revenue recognition in H2CY25 from two indigenised primary coolant pumps delivered to NPCIL, pending final approval.

The Anup Engineering:

The company is set to deliver a strong 30% YoY revenue growth in Q1FY26, with EBITDA margin stable at 22.4%. However, PAT is expected to rise at a slower 18% YoY pace due to a higher tax rate. It maintains a FY26 topline growth guidance of 25–30%, with Q2FY26 order book likely to benefit from a healthy tender pipeline, though Q1FY26 order book may remain flat sequentially. To expand its addressable market, the company has forayed into (i) testing and certification services for process equipment, expected to contribute Rs 1,000–1,500 mn in revenue by FY27 at over 30% EBITDA margin, and (ii) air-cooled heat exchangers with shorter gestation and higher volumes, aiding capacity utilization. Additionally, its subsidiary Mabel Engineering, acquired last year, is expected to add Rs 900 mn to FY26 revenue.

ESAB India:

Welding activity typically slows during the rainy season, and with an early monsoon, sales may see a slight dip in Q1FY26. Still, ESAB India is expected to post 10% YoY revenue growth, with PAT rising 8% due to our expectations of a marginally lower EBITDA/PAT margin. In June 2025, its parent acquired EWM GmbH, a global TIG welding leader. TIG welding, known for precision and quality, is vital in aerospace, automotive, and manufacturing. While integration will take time, this move expands the parent’s addressable market and is expected to benefit ESAB India over time.

Kirloskar Pneumatic Co. Ltd. (KPCL):

We expect revenue to grow by 17% yoy backed by a strong order book, more biased towards short term equipment orders thereby leading to an equally strong 1FY26. Margins are expected to improve to 16.4% due to the shift in product mix. Our channel checks state that overall demand remains strong and KPCL should largely deliver its guidance on growth. Order execution and new order booking will be key monitorables in Q1FY26 results that will determine the growth for FY26.

JNK India Ltd.:

We expect revenue to grow by 25% yoy supported by large slippages from last quarter and change in revenue recognition policy starting 1QFY26. Although some of the large orders of HPCL and Reliance will only be completed in 2HFY26, the new revenue recognition policy should spread the revenue based on cost incurred. This is also expected to improve margins across all quarters. Closing order book as of Jun’25 will be key monitorable, although JNK has not reported any large order booking during the quarter which continues to be an overhang.

Sector Analysis by

• Mohit Surana - Senior Research Analyst, Institutional Equities
• Sahil Sanghvi - Research Analyst, Institutional Equities

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