IDBI Capital Recommends 4 Capital Goods Stocks With Up to 24% Growth Potential – Cummins, Ador Welding, and More

India is set for major economic growth, aiming to become a $10 trillion economy in the next decade, adding $1 trillion every 1.5 years. The capital goods sector is expected to play a key role in this growth, especially with the government’s focus on infrastructure and manufacturing through initiatives like Gati Shakti, the National Infrastructure Pipeline, and Production Linked Incentive (PLI) schemes.

Recognizing this, domestic brokerage IDBI Capital has given a ‘buy’ rating to four capital goods stocks: Ador Welding, Voltamp Transformers, Kirloskar Oil Engines, and Cummins India. These companies are seen as well-positioned to benefit from the ongoing investment in the country’s infrastructure and manufacturing sectors.

Capital goods stocks have risen over 100% this year, following strong performance in 2022. Despite high valuations, IDBI Capital believes there’s still significant room for growth in quality companies, driven by rising domestic demand, global supply chain changes, government-backed PLI schemes, and India’s potential as a manufacturing hub.

Here’s a closer look at the four stocks IDBI Capital recommends:

Ador Welding: 24% Upside Potential

IDBI Capital has set a target price of ₹1,621 for Ador Welding, projecting a 24% increase. The company is expected to grow 11% in revenue, 16% in EBITDA, and 21% in profit annually from FY24 to FY27. As a key player in the welding industry, Ador is poised to benefit from the country’s capex cycle and its strong market share in welding equipment.

Voltamp Transformers: 23% Growth Forecast

Voltamp Transformers has seen significant stock growth over the past 15 months, driven by strong earnings and demand from sectors like renewable energy and electric vehicles. IDBI Capital has set a target price of ₹16,681, predicting a 23% rise in the stock.

Kirloskar Oil Engines: 19.5% Upside Expected

With a solid presence in sectors like real estate, hospitality, and data centers, Kirloskar Oil Engines is expected to continue growing. IDBI Capital has set a target price of ₹1,491, forecasting a 19.5% increase in the stock.

Cummins: 16% Growth Potential

Despite high valuations, Cummins is expected to keep growing due to strong demand for generators and government initiatives boosting manufacturing. IDBI Capital has set a target price of ₹4,401, predicting a 16% rise in the stock, driven by both domestic and export demand.

In summary, IDBI Capital sees strong growth potential for these capital goods stocks, driven by India’s ongoing infrastructure and manufacturing boom.