Q3FY26 Capital Goods Sector Report - Selective strength in India's capex cycle

India’s capex momentum heading into Q3FY26 remains positive, underpinned by strong execution in select cap goods companies, where order inflows and approvals have accelerated across thermal, renewables, T&D and defense platforms, even as domestic private capex and export demand stay selective amid elevated US tariffs and global uncertainty. While high import duties and prior regulatory changes have weighed margins and led to occasional order deferrals in parts of the broader capital goods universe, robust government capex (roads/rail), defense acquisition approvals of over Rs 3.3 trn in FY26 YTD, record auto demand supported by GST cuts, and improving affordability reinforce a supportive demand base. From our coverage, our top picks are TD Power Systems, Inox India, and KSB.

TD Power Systems:

We estimate Q3 YoY revenue and PAT growth of ~38% and ~43%, respectively, with EBITDA and PAT margins remaining stable at ~18.3% and ~13.3%, respectively. Strong performance expected due to sustained data center driven demand and supported by continued traction in thermal renewables and grid-stabilization. The order backlog of ~Rs 15.9 bn, is expected to strengthen further given healthy inflows. Additionally, the new Tumkur facility provides incremental capacity to support elevated demand levels.

Inox India:

We expect Inox India to deliver ~16% revenue growth and ~13% PAT growth in Q3FY26, with EBITDA margin at 21.8%. Inox India’s current order backlog stands at ~Rs 14.85 bn, providing strong revenue visibility into H2FY26. Some moderation in YoY order intake growth is expected this quarter as Q3FY25 had a one-off boost coming from Bahamas orders in the LNG segment.

KSB:

Q4 is usually a seasonally strong quarter for KSB, with ~15% YoY revenue growth and ~19% YoY PAT growth expected in Q4CY25, while EBITDA margin seen stable at ~13.1%. With an order backlog of ~Rs 26 bn, around half attributable to orders from NPCIL, execution momentum is expected to strengthen once NPCIL approvals are secured, which we now expect in Q1CY26. The passage of the SHANTI bill is a medium-to-long term positive for the company as the addressable market should expand significantly.

The Anup Engineering:

We expect 17.5%+ YoY revenue growth in Q3FY26, with EBITDA margins sustained at ~22.2%. The order book stood at Rs6.02 bn in Q2FY26, with a moderated book-to-bill of 0.7x, reflecting slower order conversion amid customer deferrals and tariff-related uncertainties. While management remains confident of pending orders translating into inflows, order visibility and cash conversion remain key monitorable.

ESAB India:

For Q3, we estimate revenue and PAT to grow at a CAGR of 12%, with EBITDA margins stable at 18.9%. ESAB’s Q2 performance hinted towards a recovery in demand, marked by improved operating leverage and better growth. We expect this momentum to sustain into Q3 as well. Further, the GOI’s announcement of a comprehensive policy package for the shipbuilding and maritime sector is likely to drive incremental demand for welding equipment and consumables, positioning ESAB as one of the key beneficiaries in the medium term.

Triveni Turbine:

We expect muted Q3 performance, with revenue growth likely to remain flat to positive. EBITDA and PAT margins are expected to be maintained at ~22% and ~18%, respectively. FY26 is shaping up to be a relatively soft year, but the company’s strong aftermarket franchise, leadership in the sub-30 MW steam turbine segment, and entry into adjacent industrial heat solutions should support demand and underpin recovery beyond the near term .

JNK India:

We expect a 2x YoY growth in revenue driven by continued execution of new orders under the input-based revenue recognition framework. With legacy projects now forming a negligible share of revenues, EBITDA margins are expected to improve sequentially to ~11%, supported by better mix and operating leverage, though still below steady-state levels as full normalization is likely only in Q4FY26.

Kirloskar Pneumatic Company Ltd. (KPCL):

We expect a strong recovery in Q3FY26, with revenues up ~48% YoY, led by improved execution and clearance of deferred orders from H1. Higher dispatches across air and refrigeration, supported by scaling of Tezcatlipoca, initial ramp-up of Tyche, and greater use of in-house Khione compressors, should drive the rebound, while process gas remains weak. EBITDA margin is expected to improve to ~17.5%, aided by operating leverage and a better product mix.

Click to download the full Capital Goods Sector Report 3QFY26 Company Update

Analyst:

• Mohit Surana - Research Associate, Institutional Equities (NISM-202300189881)
• Sahil Sanghvi - Research Analyst, Institutional Equities (NISM-201900004744)
• Mohd Haris - Research Associate, Institutional Equities (NISM-202400161268)
• Uvais Khatri - Research Associate, Institutional Equities (NISM-202300049054)

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FAQs on Capital Goods sector report 3QFY26

What is driving capex momentum in Q3FY26?

Government-led spending in defense, power, railways, and infrastructure remains strong, supported by large approvals and faster execution.

Why is performance selective across the sector?

Elevated import duties, regulatory changes, and cautious private capex have led to order deferrals in some segments, making stock selection critical.

Which themes look structurally stronger?

Data centers, thermal-renewables, defense manufacturing, LNG infrastructure, and grid-stabilization projects show better visibility.

Are margins at risk?

Margins remain largely stable for companies with strong execution and pricing power, though input costs and approval timelines remain key monitorables.

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