Why Is The Transmission Pipeline Strengthening Capital Goods Outlook For KEC And KPI?

About Capital Goods Sector And MOSL’s Coverage

The capital goods sector plays a crucial role in driving India’s infrastructure growth. It includes companies engaged in engineering, procurement, and construction (EPC) of power transmission, heavy engineering, and industrial projects. Within this sector, transmission and distribution (T&D) is a key segment, supporting the modernization of India’s electricity grid.

Motilal Oswal Securities Limited (MOSL) has recently released a note on the capital goods sector, highlighting a strong transmission pipeline and positive prospects for leading players like KEC International (KEC) and Kalpataru Projects International (KPI). The brokerage believes that commodity price stability, coupled with new opportunities such as HVDC projects and global contracts, will support margin expansion and revenue growth from FY26 onward.

Transmission Ordering Pipeline Remains Strong

The Central Electricity Authority (CEA) has stepped up transmission ordering activity after a phase of moderation in early FY26. Industry interactions suggest that order inflows are set to remain strong in the coming years, particularly as India expands its renewable energy capacity and strengthens interstate transmission networks.

Both KEC and KPI are expected to benefit significantly from this trend. Their strong execution track record and diversified portfolios position them to secure new domestic and international contracts.

Company Strategies And Growth Opportunities

KPI (Kalpataru Projects International): KPI continues to focus on international markets, HVDC projects, and diversification beyond T&D. Its robust balance sheet and proven ability to execute complex projects enhance its growth outlook. MOSL’s BUY rating reflects confidence in KPI’s ability to scale further.

KEC International: KEC has a diversified presence across transmission, railways, and civil construction. While MOSL remains Neutral on the stock, it acknowledges KEC’s steady order book and potential for margin recovery as commodity prices stabilize.

Commodity Prices And Margins

One of the critical factors affecting profitability in the capital goods sector is input cost volatility. With commodity prices such as steel and aluminum stabilizing, margins for KEC and KPI are expected to improve from FY26 onwards. This provides room for operating leverage benefits as order inflows pick up pace.

Transmission And Distribution Segment Dominance

MOSL expects the T&D segment to remain the dominant growth driver for both KPI and KEC. The scale of investment required to modernize India’s grid, integrate renewable energy, and enhance reliability provides significant opportunities. While diversification efforts are ongoing, T&D remains the anchor segment for earnings growth.

Ratings And Valuations

MOSL’s valuation reflects the strong fundamentals of KPI and the steady performance of KEC. KPI’s BUY rating with a target of ₹1,450 underscores its favorable positioning in international and domestic markets. KEC’s Neutral rating with a ₹950 target indicates a more balanced risk-reward outlook, though improvement in margins could provide upside surprises.

Long-Term Capital Goods Outlook

The capital goods sector is expected to be a major beneficiary of India’s infrastructure push. Transmission projects, renewable energy integration, and international expansion opportunities provide a strong multi-year growth runway. Both KPI and KEC are strategically positioned to capture this demand.

Investor Takeaway

MOSL’s report highlights a strong and growing transmission pipeline, which will benefit both KPI and KEC. While KPI has been rated a BUY with a target of ₹1,450 due to its superior positioning, KEC has received a Neutral rating with a target of ₹950, reflecting stable but moderate growth expectations. The broader capital goods sector remains well-placed to benefit from India’s infrastructure and energy transition.

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SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.