Budget impact: Capital expenditure-tilt positive for most sectors

Domestic-focussed sectors due to the government's push on infrastructure and indigenous manufacturing are the big winners in the Budget

The Street liked the government’s intent on staying the course and taking the infrastructure route to growth. The gains from this route are expected to have a long-term multiplier effect, as compared to driving demand through consumption spending. Despite buoyancy in tax collection, the government has been conservative on income estimates, which could surprise on the upside and act as a cushion in the midst of external macro pressures.

Domestic-focussed sectors due to the government’s push on infrastructure and indigenous manufacturing (Atmanirbhar Bharat, Production-linked Incentive or PLI scheme) are the big winners in the Budget. However, the lack of incentives for the consumer sector, barring those whose sales have a rural bias, may underperform. While most companies will benefit from the growth impetus, investors will need to watch out for any macro shocks, especially related to higher crude oil prices and increase in borrowing costs, which could negate the gains from rebound in demand. With Nifty valuations at a premium, corporate earnings delivery becomes highly crucial more so in a rising rate regime, according to Motilal Oswal Research.

Amber Enterprises India

• The hike in customs duty on wearable and hearable devices from 15 per cent to 20 per cent coupled with launch of phased manufacturing programme will boost domestic manufacturing
• Procurement of 400 Vande Bharat trains over three years could result in manufacturing 6,400 passenger coaches and benefit Amber’s subsidiary, Sidwal 
• Analysts at Anand Rathi Research believe that innovative ways of financing and faster implementation of metro rail system can be a positive for Sidwal

Larsen & Toubro

• Larsen & Toubro (L&T) to be the major beneficiary of government’s focus on infrastructure development and capital expenditure encompassing multiple schemes and sectors
• Record allocation to railways, increased defence expenditure and rise in space budget could boost order flow for the engineering and construction major 
• Higher allocation for roads and smart cities is also positive, and so is the increase in defence capex and allocation to Nuclear Power Corporation
• Provision to settle dues for government procurement projects to the extent of 75 per cent within 10 days of the bill being raised is positive for EPC players such as L&T, as it will bring down working capital, according to Kotak Securities

Ashok Leyland

• Demand for CVs could get a leg up, given the 25,000 km expansion of the NH  
• Efforts to boost public transport in urban areas backed by clean technology and electric vehicles could lead to an increase in orders for the company
• Defence research and development for private players could open a new growth segment for players such as Ashok Leyland, according to Kotak Securities. Import duty cut on rhodium will have a 5-10 bps positive impact on auto OEMs like Ashok Leyland

UltraTech Cement

• 25,000 km of highways in FY23 and 36 per cent increase in rural roads under rural road scheme. Budgetary allocation to railways increased by 14 per cent. Elara Capital expects this higher spending to generate incremental cement demand of 18 mt
• The Centre’s plan to complete 80 lakh houses in FY23 under the PM Awas Yojana and an allocation of Rs 48,000 crore for this is positive for the cement major
• Proper monitoring of Gati Shakti Plan will enable efficient execution of infrastructure development, facilitate growth, and increase cement demand, says Axis Securities

Bharat Electronics  

• The company will be a major beneficiary of rise in defence capital outlay, which is up 10 per cent y-o-y to an all-time high of Rs 1.5 trillion for FY23
• 68 per cent of defence capital budget is allocated to domestic procurement in FY23 and this is up from 58 per cent in FY22; positive for defence PSUs such as Bharat Electronics
• Allocation to Department of Space rises by 8 per cent y-o-y to Rs 13,700 crore in FY23 and will benefit the company, according to Elara Securities

ICICI Bank  

• Higher government capex and infrastructure spending on roads and highways, housing and 5G telecom auction augur well for corporate/commercial credit growth, according to Emkay Research
• IBC amendments to enhance efficiency of resolution process and facilitate cross-border insolvency resolution and is positive for the bank, says Elara Capital
• The ECLGS Scheme has been extended till 2023 with the outlay enhanced to Rs 5 trillion from Rs 4.5 trillion with the additional amount marked for hospitality and related enterprises is positive for the bank

Container Corp Of India

• Development of 100 new cargo terminals over the next three years will enhance logistic infrastructure boosting volumes for Container Corporation of India (Concor)
• Setting up of four new multi-modal logistic parks in FY23 through public-private partnerships is expected to be beneficial for the logistics solutions major
• Development of a unified logistics interface platform to exchange data on a real-time basis is expected to enable efficient movement of goods, reduce logistics cost and improve inventory management

ITC

• No tax hike on cigarettes for second year in a row is a positive for the market leader
• Stability in taxation would aid volume growth in FY23 and lead to market share gains from the unorganised and illegal segments in a high inflation environment
• The move on Kisan drones for crop assessment and spraying of insecticides is expected to be positive, as the company could invest in drone-tech for agriculture sourcing, according to Axis Securities
• Continued support to rural economy with Rs 73,000 crore for MGNAREGA and elevated allocation towards agriculture augur well

Siemens

• Capital investment for railways increased by 14 per cent y-o-y to an allocation of Rs 2.5 trillion and is positive for component manufacturers such as Siemens
• The company is expected to gain from the government’s focus on increasing the share of manufacturing in GDP under its various programmes such as AtmaNirbhar Bharat and production-linked incentive scheme
• Focus on rural electrification, smart cities and metro to help engineering companies such as Siemens, according to Antique Stock Broking

Supreme Industries  

• Rs 60,000 crore allotted under the Har Ghar Jal programme, aimed at providing tap water connections to 38 million households in FY23 is a key opportunity for plastic pipe manufacturers
• The company would be a beneficiary of the PM Awas Yojana, which has been allocated Rs 48,000 crore in FY23 to be spent on creating 8 million houses under the affordable housing scheme
• Proposals across construction, infrastructure and real-estate will boost demand for plastic pipe and fitting companies

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