Mixed Fortunes: EPC Sector Faces Challenges, Capital Goods Sector Shines in Q4FY25

The EPC and capital goods sectors in Q4FY25 show contrasting performances. While EPC struggles with declines in revenue and profit, the capital goods sector experiences growth. Delays in government contracts and challenges in infrastructure projects persist, but improvements are anticipated, with EPC stocks poised for potential positive re-rating.

The engineering, procurement, and construction (EPC) and capital goods sectors are painting different pictures for the January-March quarter of fiscal year 2025, according to a report by HDFC Securities. The EPC sector is staring at a downtrend with expectations of slight declines in revenue, operating profit, and net profit year-on-year.

Revenue for the EPC segment is projected to dip 0.9% to Rs 23,080 crore, with EBITDA falling 7.5% to Rs 3,010 crore and PAT sliding 9.8% to Rs 1,230 crore. The EBITDA margin is anticipated to drop to 13%, a decrease of 0.93 percentage points compared to the same quarter last year. HDFC Securities stated, "We expect EPC/infra universe revenue/EBITDA/PAT to grow/decline -0.9/-7.5/-9.8% YoY."

Conversely, the capital goods sector is expected to perform robustly, with revenue projected to rise 13.9% to Rs 1,06,530 crore. EBITDA is set to increase by 13% to Rs 11,730 crore, and PAT is forecasted to grow by 4.1% to Rs 7,110 crore. However, the EBITDA margin will likely stay flat at 11% with a slight dip. As execution is expected to improve, potential positive re-rating of EPC stocks is on the horizon. In contrast, capital goods stocks maintain high valuations.

(With inputs from agencies.)