ABB India, L&T, Praj, Siemens & Cummins: Kotak upgrades capital good stocks; check targets

Amid the rising volatility in the stock markets following the recent carnage, domestic brokerage firm Kotak Institutional Equities has upgraded select capital goods companies as it believes that the downturn for these companies is in the last leg. It remains constructive on stocks where salience and growing relevance of business themes beyond recovery in private sector spending stand out.

Kotak Institutional Equities has upgraded Carborundum Universal and Praj Industries to 'buy' tag; ABB India and Thermax to 'add' and Siemens to 'reduce' rating. On the other hand, it has maintained its 'buy' call on Cummins India, 'reduce' rating for Larsen & Toubro Ltd (L&T) and 'sell' tag for CG Power.

"Select stocks such as L&T, Praj Industries and Carborundum Universal are factoring in lower-than-historical business CAGR. ABB, Cummins and Thermax are in the 1-1.6 per cent range on this metric, while Siemens and CG Power continue to factor in 4-7 per cent higher-than-historical business CAGR. The key aspect to consider is a long 20-year call the sector has become," said Kotak.

The above four stocks are all diversified plays on themes beyond private sector spending. Also, the difference in growth expectations over the next 20 years for these stocks is much lower versus the rest of the pack. Mid-cap stocks with company-specific risks saw sharp corrections on weak results and Russia overhang, Kotak added.

Shares of Praj Industries Ltd have plunged 40 per cent in the year 2025 so far, while Carborundum Universal Ltd has cracked 30 per cent since the beginning for the current calendar. ABB India Ltd and Siemens India Ltd have fallen 24 per cent on a year-to-date (YTD) basis. Thermax Ltd has declined 20 per cent and L&T is down 12 per cent in this year.

Kotak has upgraded Carborundum Universal and Praj Industries to 'buy' as they have a low base of near-term earnings as well, giving them a fair value of Rs 980 and Rs 740, respectively. It has also upgraded ABB India and Thermax to 'add' (from reduce), with a target price of Rs 5,350 and Rs 3,600, respectively.

It has also upgraded Siemens to 'reduce' as the risk emanates from Siemens from the upcoming demerger—a potential change in license fee/royalty terms as promoters change hands in the demerged entities. Siemens has a fair value of Rs 4,700.

However, Kotak has maintained 'buy' on Cummins India with fair value of Rx 3,700, 'reduce' on L&T with a fair value of Rs 3,400 and 'sell' on CG Power with a fair value of Rs 52. It finds CG Power to remain expensive in the context of a limited span of growth opportunity in domestic T&D and Kavach opportunity.