Add CG Power and Industrial Solutions Limited For Target Rs. 875 By Emkay Global Financial Services Ltd
We maintain BUY on CG Power and Industrial Solutions (CG Power) while raising our target price by ~13% to Rs875 from Rs775, valuing the company at 55x FY28E earnings. Q4FY26 performance was better than our expectations, with revenue/EBITDA/PAT growth at 25/29/25% YoY to Rs34.4/4.7/3.6bn, respectively. The strong performance was primarily driven by the Power Systems segment (+50% YoY), reflecting robust underlying execution. However, Industrial Systems performance was muted, with challenges in the Railway business. EBITDA margin improved by ~40bps YoY to 13.6%, mainly led by higher profitability in Power Systems. With rising input cost, the company has taken 17% price hike in the Motor business over the last four quarters. 4Q order inflow grew 39% YoY to Rs53.4bn, resulting in order backlog of Rs171bn, up 61% YoY. Besides the domestic market, we see exports as among the large growth opportunities, supported by a global energy transition drive and datacenter capex.
Q4FY26 results – Power Systems continues to drive growth
CG Power’s Q4FY26 results were ahead of our estimates. Revenue grew 25% YoY at Rs34.4bn, mainly led by Power Systems (up 50% YoY) at Rs14.9bn. The robust growth is on the back of a strong opening order backlog and sustained execution. Industrial Systems revenue was flat at Rs17.9bn, impacted by weakness in the railways business. EBITDA margin expanded by 41bps YoY to 13.6% (Emkay estimate: 12.7%), mainly led by Power Systems, wherein EBIT margin improved by 287bps YoY to 23.8%. Industrial Systems profitability was muted, with EBIT margin declining by 200bps YoY to 9%.
Robust order backlog; exports to be key growth area
Consolidated order inflow increased 39% YoY to Rs53.4bn. This was mainly led by Power Systems, wherein order inflow jumped 72% YoY at Rs30.3bn, benefiting from the global energy transition drive. Industrial Systems order inflow declined 22% YoY at Rs14.8bn. Overall, the order book grew 61% YoY to Rs171bn (book-to-bill improved to 1.4x from 1.1x in FY25). The company recently secured a Rs9bn power transformer export order from Tallgrass Integrated Logistics Solutions LLC (USA), for a large-scale data-center project in the US, reinforcing its export push and strengthening its presence in highgrowth international markets.
View and valuations
We remain long-term positive on CG Power, given its strong product portfolio and impeccable execution track record. The company continues to report healthy return ratios, with RoE of 20%/23% in FY27/28E. It is one of the large early entrants in the high-growth semiconductor business, with capex of Rs76bn. We marginally tweak our estimates and maintain BUY on the stock while raising our TP by ~13% to Rs875, valuing the core business at 55x FY28E and OSAT at Rs55/share.
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354
