Buy CG Power and Industrial Solutions Ltd For Target Rs. 696 By Geojit Financial Services Ltd
Power market looks bright
CG Power and Industrial Solutions Ltd manufactures and distributes electrical equipment such as transformers, reactors and control equipment, as well as industrial motors and pumps and communication systems.
* In Q3FY25, CG Power’s consolidated revenue surged 27.1% to Rs. 2,516cr, driven by strong double-digit growth in the industrial and power system segments.
* Revenue from industrial systems rose 19.9% to Rs. 1,591cr. An order intake of Rs. 1,877cr (+37% YoY) and an expanding order backlog of Rs. 2,968cr (+50% YoY) as of December 31, 2024, reflected strong demand for the company’s products.
* The power system division recorded a 42.4% YoY increase in revenue, at Rs. 920cr, supported by strong order inflow of Rs. 1,759cr (+97% YoY) and an unexecuted backlog of Rs. 5,984cr (+67% YoY) as of December 31, 2024.
* In Q3FY25, EBITDA increased 26.3% YoY to Rs. 365cr, while margins contracted by 10bps to 14.5% due to a change in the revenue mix; higher contribution from the railway business impacted margins.
* Profit after tax (PAT) grew 21% YoY to Rs. 238cr, supported by robust revenue expansion.
Outlook & Valuation
CG Power's Q3FY25 results highlights a growth trajectory with a 27.1% YoY sales increase and a strong order intake. This is a sign of a robust business pipeline. The company stands to gain from an expanding power transformer market, supported by increase in solar capacity and strong domestic demand for electricity. The distribution transformer segment remains stable due to the company’s earlier capacity. CG Power aims to enhance export capabilities, particularly in power systems, to increase the share of international revenue. Additionally, continuous improvement in market strategies, especially for the motors segment, are expected to drive up market share and revenue. Therefore, we upgrade our rating on the stock to BUY, based on 63x FY27E adjusted EPS with a rolled forward target price of Rs. 696.
over or under performance to benchmark index
For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer
SEBI Registration Number: INH200000345
