Buy CG Power and Industrial Solutions; target of Rs 1140: Motilal Oswal
Moneycontrol • 6 days ago
Key Investment Pillars
- Power systems growth: CG Power's power systems segment is expected to drive growth, with a strong order book and increasing demand from domestic utilities, AI infrastructure, and exports. The company has announced capacity expansion plans to cater to growing demand.
- Industrial systems recovery: The industrial systems segment is expected to recover, driven by improving motors business and the commencement of Kavach production. The company has implemented price hikes to offset commodity inflation and is developing new products to strengthen its portfolio.
- Semiconductor scale-up: The semiconductor business is expected to scale up, with the G2 unit qualification commencing in mid-FY28 and commercial production expected in late FY28. The company has acquired TOSIL Systems to strengthen its capabilities in silicon design and engineering.
- Capacity expansion: The company has announced multiple capex plans to expand capacities and build capabilities across power transformers, switchgear, and GIS.
Thesis Validation Checklist
- Order inflow growth: Monitor order inflows in power systems and industrial segments to gauge demand and execution.
- Revenue and margin growth: Track revenue and margin growth in both segments to assess the company's ability to sustain growth and improve profitability.
- Semiconductor business progress: Monitor the progress of the semiconductor business, including qualification and commercial production timelines.
- Capacity utilization: Track capacity utilization rates to assess the company's ability to meet growing demand and improve operational efficiencies.