Acceleration of capex upcycle is seen positive for construction contractor Larsen & Toubro, capital goods firms such as ABB India, Siemens and Cummins India and steelmakers such as Tata Steel, Jindal Steel and SAIL). A total of 68 global companies are exposed to the emerging theme of supply chain shift, with alone expected to shift at least 18 per cent of its global iPhones production to India by FY25, BofA Securities in its latest report. Given India's focus on scale, its PLI scheme targeting Samsung and contract manufactures of Apple, BofA Securities believes India can meet its ambitious target of three times domestic production and five times exports by FY26, which it feels could help create a vendor ecosystem over time.
Policy stability, labour productivity and last mile connectivity are key factors to watch, it said as it suggested dozens of direct and in-direct beneficiaries of the shift in supply chain to India.
"On the back of high growth expected within the electronics' domestic manufacturing as well as exports, we see potential for large growth for India's electronics manufacturing services sector focused on contract manufacturing for global/domestic electronics' brands and have already expanded into original design manufacturing to improve their margins/expand offerings," it said.
BofA Securities also see gains for Indian consumer electronics brands within India such as Havells India, Voltas and Crompton Consumer. The foreign brokerage has 'Buy' ratings on the three stocks, due to their ability to curtail costs by saving on import duties and scaling up of indigenisation. These players also have plans to enter export markets to gain production scale benefits, it noted.
BofA Securities said the scale-up by the global firms requires capex, which is seen helping accelerate the ongoing capex upcycle in India.
"Within our coverage, we see acceleration of the capex upcycle as a positive for construction contractors (Larsen & Toubro), capital goods firms (ABB India, Siemens, Cummins India), steel (Tata Steel, Jindal Steel, SAIL), cement (UltraTech) and the financials sector (HDFC Bank, ICICI Bank, SBI, Axis Bank, Bank of Baroda, IndusInd Bank)," it said.
Among the indirect beneficiaries of supply chain shift, BofA Securities said potentially higher EXIM trade on the back of liberalised imports to expand exports could be positive for logistic firms such as the ports, rail/road-based freight operators such as Concor, Gujarat Pipavav Port and commercial vehicle manufacturers such as Tata Motors, Ashok Leyland Eicher Motors and Bharat Forge
"That said, we remain negative on players exposed to the road ecosystem in the near term as we expect a rapid increase in rail infrastructure and a resultant shift of freight cargo from road to rail," it said.
Here's a list of stocks that BofA Securities believes are a play on the emerging theme:
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