Capital expenditures (capex) are vital for a company's growth and competitiveness as this spending is an investment into the future of the business, and a bet on upcoming growth. The capex growth forecasts tell us which companies are making the biggest bets on expansion and growth. Higher forecasts suggest aggressive growth strategies and financial health, and indicate the company's commitment to long-term development and market leadership.
In this edition of Chart of the Week, we look at a screener of companies with high forecasted capex growth. The bubble chart circles represent the size of capex growth estimates. We look at the individual sectors poised for high capex growth in the coming year, and identify the biggest contributors.
General industrial stocks lead in capex growth estimates, thanks to expansion plans
Hitachi Energy, Timken India, and Jindal Saw have the highest capex growth estimates in the general industrials sector in FY24
Seven of the 25 stocks in our chart belong to the general industrial sector. Hitachi Energy India leads with an estimated capex growth of 735.4% for FY24, thanks to plans to add 45 new data centres in three years to meet India’s booming market. These data centres are outsourced by companies to store, manage, and process extensive amounts of data and computing systems. Hitachi Energy’s solutions align perfectly with data centre needs. Projections indicate a sixfold increase in sector capacity over the next six years, driven by substantial investments (capex) of Rs 1.05 to 1.20 lakh crore.
Moving on, Timken India has an estimated capex growth of 527.3% for FY24. Its diverse presence across capex-sensitive sectors like consumer durables, automobiles and chemicals sets a strong foundation for its future. The company plans to spend Rs 600 crore on a new roller bearings plant. Monarch Networth Capital anticipates Timken's significant capex to challenge competitors, leading to robust growth in railways, heavy mobility, and exports.
Another major player, Jindal Saw, is estimated to grow its capex by 462.8% in FY24. Close behind are RHI Magnesita and Praj Industries with capex growth of 284% and 283%, respectively. Praj Industries plans a total capex of Rs 120 crore in FY24, with Rs 100 crore set aside for Praj GenX in the Energy Transition & Climate Action (ETCA) sector. This funding aims to support advanced solutions for low-carbon fuel projects like Blue and Green Hydrogen/ammonia. Commercial production is expected to start from Q4FY24. Finally, we have CG Power and Industrial Solutions with an estimated capex growth of 222.5% in the coming year.
Four IT sector firms projected to have high capex growth in FY24
In the software & services sector, Mphasis leads with an estimated capex growth of 567% in FY24. The acquisition of Silverline for Rs 1,100.7 crore will enhance its salesforce capabilities. Zensar Technologies follows with an 182.6% growth, and Cyient and Firstsource Solutions are estimated at 167% and 165.4% in FY24, respectively.
Consumer durables and automotive stocks have greenfield projects scheduled
Three consumer durable firms have high capex spends planned in FY24
In the consumer durables sector, Finolex Cables stands out with the highest estimated capex growth of 736.2% in FY24. This is also the highest forecast in the Nifty 500. The company plans to invest Rs 400 crore over the next 12-18 months to expand capacities in communication, solar, automotive, and construction cables. It aims to increase optic fibre capacity from 8 to 10 million fibre km and double fibre draw capacity to 8 million km.
Kaynes Technology India comes next with an estimated capex growth of 304.3%, while KEI Industries is projected to grow its capex by 298.7% in FY24.
In the automobiles & auto components sector, Asahi India Glass is estimated to see a capex growth of 389.9% during FY24. Its Rs 1,400 crore capex will be mainly for maintenance and funding of a major greenfield project. An additional Rs 1,000 crore is planned for FY25, covering remaining expenses for the greenfield factory and expanding the automotive segment's capacity. Samvardhana Motherson International also has an estimated capex growth of 213.2% in FY24.
Chemical and pharma stocks set high capex growth estimates
PI Industries from the chemicals sector has the highest estimated capex growth of 324% for FY24. In H1FY24, the company spent Rs 763 crore on capex, including a Rs 497 crore investment in Pharma assets. It aims for an overall capex of Rs 800 crore, including a Rs 300 crore spillover from FY23. This is to enhance capacity utilization and improve throughput. The company has also planned Rs 80-100 crore annually to upgrade its pharma facilities and improve technological capabilities. Deepak Nitrite follows with an estimated capex growth of 176.5% during the same period.
In the pharmaceutical sector, Gland Pharma tops with an estimate of 350.6% in capex growth, followed by Ipca Laboratories, which is expected to spend 165.6% more. Next, diversified consumer services have Cera Sanitaryware leading with 218.1%. The company increased its brownfield faucetware capacity from 3 to 4 lakh pieces per month, starting in September 2023. It has also finalized land acquisition in Gujarat for a new sanitaryware plant. A maintenance capex of Rs 35 crore is planned for FY24, with Rs 7 crore already spent. Max Healthcare Institute is projected to see a 207.3% capex growth in the current financial year.
Other notable stocks in our list are AMC Nippon Life India Asset Management (347%), fertilizers major Chambal Fertilisers and Chemicals (278.4%) and FMCG player Emami (239.8%).
Lastly, Century Plyboards is estimated to achieve a capex growth of 260.6% for FY24, with a planned capex of Rs 450 crore in FY25 for expansions. This includes a particle board expansion in Chennai to 2,40,000 cubic metres by the end of FY25 (capex Rs 550 crore). These strategic investments aim to strengthen Century's production capacities across particle board, plywood, laminates and fibre board segments.
