Steady Growth Amid Challenges: The Outlook for Construction Equipment

The domestic construction equipment industry is set to see 2-4% volume growth despite slower real estate and road construction. Revenue is expected to increase 6-8% due to selective price hikes. Export realisations and stable steel prices will help mitigate pricing pressures, keeping credit profiles stable.

Amid a sluggish real estate market and slower road development, the domestic construction equipment industry is poised to experience volume growth of 2-4% this fiscal year and the following one, states Crisil Ratings. However, revenues are anticipated to climb between 6-8%, attributed to selective price hikes compensating for heightened compliance costs.

Although domestic demand remains subdued, robust export realisations coupled with stable steel prices are expected to alleviate pricing pressures posed by low-cost imports. This will limit the contraction in operating margin to 11%, down from approximately 12% in the previous fiscal year.

A focused capital expenditure strategy is ensuring that companies maintain leverage control and stable credit profiles. An analysis of 17 key manufacturers, representing about 75% of industry volume, supports these findings. Notably, construction equipment sales are primarily driven by sectors including roads, mining, and real estate, with earthmoving machinery accounting for 70% of the product mix.

(With inputs from agencies.)