Mumbai, Feb 24 (IANS) Deteriorating macroeconomic trends along with strained government finances continued to affect engineering and capital goods companies’ operational performance, said a report by Emkay Global on Monday.
Companies in Emkay’s engineering and capital goods (ECG) coverage universe had reported muted revenue growth of just 1 per cent year-on-year, it said. Emkay’s ECG universe saw an 8 per cent decline in order inflows, and order backlog growth at tepid 3 per cent.
“Although the book-to-bill ratio of the sector improved slightly from the the last quarter, it has been deteriorating consistently over the past four years,” it said.
“Most companies in our ECG universe highlighted deteriorating macroeconomic trends and strained government finances, affecting order outlook, execution challenges and working capital stress emanating from a tightened liquidity situation,” said the Emkay report.
Despite the decline in growth visibility and rising challenges on working capital, “we have not seen the stocks correcting much in the sector,” it said.
“Continued order inflows and execution disappointment will result in a de-rating of stocks, and accordingly, we keep our bearish stance on the sector in our sector EAP.”