Capital Goods index hits four-year low on weak Q1 earnings

So far in 2013, the index has underperformed the market by falling 28% against less than 1% drop in S&P BSE Sensex.

Shares of capital goods (CG) companies are under pressure with the Bombay Stock Exchange (BSE) CG index hits four-year low, after the sector majors has reported a lower-than-expected net profit growth for the quarter ended June 30, 2013 (Q1).

Bharat Heavy Electricals Limited (BHEL), Larsen and Toubro, SKF India, Crompton Greaves, Siemens and Thermax are trading lower by 1-13% on BSE.

The BSE CG index has tanked 2.5% or 202 points at 7,810 as compared to 0.56% or 107 points rise in benchmark S&P BSE Sensex at 1058 hours.

The CG index hits low of 7,780.84, its lowest level since April 2009. The index has underperformed the market by falling 28% so far in current calendar year 2013 against less than 1% drop in benchmark index.

The aggregate net profit of 10 companies which featuring in CG index, has declined by 67% to Rs 415 crore in Q1 FY2014 against Rs 1,254 crore during the corresponding quarter of previous fiscal. Net sales too, down by 7% at Rs 32,498 crore for the quarter over the previous year.

Among the individual stocks, BHEL has tanked 14% to Rs 128, its lowest level since December 2005, after reporting a sharp 50% year-on-year drop in its net profit at Rs 465 crore for the first quarter ended June 30, 2013 (Q1), due to lower sales. The power equipment maker had clocked net profit of Rs 921 crore in the year-ago period.

The company’s net sales declined 31% to Rs 6,353 crore for the quarter from Rs 8,326 crore in the same period a year ago, according to a regulatory filing.

Analysts, on an average, had expected a state-run company to report net profit of Rs 794 crore on net sales of Rs 8,043 crore for the quarter.