Capital Goods – Apr-Jun’26 Earnings Preview – Mixed Q1: T&D MNCs likely to outshine disruptions

We expect our capital goods coverage universe to report mixed performance in Q1FY27 driven by (1) healthy execution momentum across T&D-led MNCs product companies supported by healthy order book and sustained domestic demand; (2) relatively slower execution by T&D-focused EPC players amid supply chain disruptions from the Middle East conflict and labor availability issues in select states due to elections; (3) improved execution of strong order backlogs in defense companies, supported by a healthy order pipeline following recent DAC AoN approvals; (4) moderate performance in industrial product and machinery companies due to delays in order conversion, despite healthy enquiry pipelines, amid elevated commodity prices and supply chain disruptions; (5) improved performance in consumable companies; and (6) some weakness in export-oriented businesses owing to supply chain disruptions. Overall, we expect revenue/EBITDA to grow by 10%/12% YoY (12%/19.7% YoY ex-L&T) in Q1FY27, led by healthy execution in T&D-led MNCs product companies and defense companies, partly offset by weaker execution in EPC segments amid labor challenges and supply chain disruptions. However, we continue to remain constructive on segments witnessing sustained investments, particularly transmission, data centers and defense, and prefer companies with meaningful exposure to these themes. Our top picks are Bharat Electronics and Engineers India.