Our capital goods and defence coverage universe reported a healthy quarterly performance with cumulative revenue growth of 8.6% YoY to Rs1.5trn and EBITDA/PAT growth of 7.2%/6.9% YoY to Rs224bn/Rs153bn despite a higher base. The product companies continued to benefit from strong domestic demand while the Chinese dumping, geopolitical and tariff related uncertainties dented the export business of product and industrial consumable companies. The project companies saw better execution and increasing traction from Power T&D, Infrastructure, Data Centers and O&G while the Defence companies outperformed on the back better execution amid push for defence indigenization. Cumulative order intake growth of 10.2% to ~Rs1.7trn was largely driven by traction in electronics, data center, power T&D, renewable energy and O&G.
Product companies reported healthy cumulative revenue growth (+9.1% YoY) against a high base primarily led by robust domestic demand. Exports were largely impacted due to geopolitical and reciprocal tariff related uncertainties. The EBITDA margins largely improved YoY driven by better operating leverage in most companies. The order intake was driven by sectors such as Data centers, T&D, electronics, O&G and Railway equipment.
Project companies (ex. Defence) reported healthy cumulative revenue growth of 11.5% YoY (+13.3% YoY ex. L&T) aided by healthy execution in Power T&D, civil infrastructure, O&G and Buildings & Factories segments. L&T’s revenue growth of 10.9% YoY was largely driven by better execution in domestic business. EBITDA margins for project companies largely improved during the quarter owing to the benefits of operating leverage and better revenue mix. Meanwhile, the labor shortages remained a headwind for the project companies.
Industrial consumable companies reported marginal improvement in the revenue (+1.2% YoY) aided by resilient domestic demand however the Chinese dumping, geopolitical and tariff related uncertainties significantly affected the export business. The margins of the consumable companies declined YoY in Q4 primarily due to an unfavorable product mix and decline in its export business.
Defence companies: HAL reported -7.2% YoY growth in Q4FY25 against a high base while Bharat Electronics (+6.9% YoY) and BEML (+9.2% YoY) reported healthy growth. The EBITDA margins of the defence companies largely increased due to better execution and operational efficiencies. Defence companies continued to benefit from the government’s push on the indigenization while the geopolitical events during the quarter led to Emergency Procurement from government which will lead to additional orders for the defence companies.