India’s nuclear push may create long-term opportunities for local engineering firms: PL Capital

India’s ambitious nuclear power plants are opening up long-term opportunities for domestic capital goods players, with localisation emerging as a key theme. As Amit Anwani, Research Analyst at PL Capital, explains, “the next step we have seen definitely is to indigenise,” highlighting the government’s focus on reducing dependence on imports in nuclear projects.

This shift is particularly significant for companies already involved in the nuclear ecosystem. “Few Indian companies that have been supplying, including

L&T, BHEL… and largely we have been importing from Russia as well,” Anwani notes, adding that the move towards domestic capability is “a step in the right direction.”

Watch the full conversation here

However, the opportunity is not immediate. While India targets scaling nuclear capacity significantly, execution and validation timelines remain long. “It will still take a couple of more years for this to really materialise as a significant order,” he says, underlining the long-gestation nature of the sector.

Also Read: Fast-food chains turn to 'fast fashion' strategy as weak demand and rising costs bite

In the near term, global developments are creating headwinds for key players. Companies like L&T, with significant exposure to the Middle East, are seeing project disruptions due to geopolitical tensions. “There was kind of eight to 10% immediate impact on the projects… which has led to seven to eight percent EPS cut for us,” Anwani says, pointing to execution challenges in the current quarter and the next.

That said, the same disruptions could turn into opportunities over time. Damage to infrastructure in conflict-hit regions may drive rebuilding demand. “To recoup this… we can see that as an opportunity for L&T in the Middle East,” he notes, suggesting a potential medium-term order pipeline for EPC players.

From a market perspective, valuations remain a concern. Anwani cautions that parts of the capital goods space are trading at elevated levels. “T&D space where the valuations are not comforting,” he says, even as strong earnings growth is expected in the segment.

In this backdrop, selectivity becomes crucial. “Our top pick remains L&T,” Anwani says, citing structural improvements and portfolio clean-up, while also highlighting niche opportunities in smaller players benefiting from transmission and distribution tailwinds.



Catch all the latest updates from the stock market here