Thursday sees Nomura/Instinet starting coverage on CG Power & Industrial Solutions (CGPOWER:IN) stock with an optimistic outlook, assigning a Buy rating and setting a price target of INR970.00. The firm recognizes CG Power as well-positioned to capitalize on industry trends across its diverse business segments.
CG Power's Industrial Systems division is expected to benefit from a shift towards more energy-efficient motors, a market where CG Power already has a strong presence with over 35% market share in low-tension (LT) motors. Additionally, the company is likely to see increased demand for its advanced drive systems.
The Power Systems segment of CG Power is also anticipated to see growth, driven by the rising demand for power equipment necessary for renewable energy integration and the need for improved power evacuation from thermal plants. This demand is part of a broader trend towards more sustainable energy solutions.
In the Railways sector, CG Power is set to gain from ongoing platform modernization efforts. The company is estimated to be capable of addressing 25-30% of the orders in this space, according to Nomura/Instinet's analysis.
Furthermore, the firm foresees potential growth in the Outsourced Semiconductor Assembly and Testing (OSAT) market, as well as in motor sales to electric vehicle (EV) manufacturers, which are both expanding sectors. Nomura/Instinet also notes CG Power's growth strategy includes inorganic acquisitions, with plans to spend INR13 billion out of a proposed Qualified Institutional Placement (QIP) of INR35 billion, mainly aimed at increasing its export penetration.
Nomura/Instinet projects robust Compound Annual Growth Rates (CAGRs) for CG Power's revenue and Profit After Tax (PAT) at 27% and 32%, respectively, over the forecast period from FY24 to FY27. This growth trajectory underscores the firm's confidence in CG Power's strategic positioning and potential for significant financial performance improvement.
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