Buy CG Power and Industrial Solutions; target of Rs 1140: Motilal Oswal

What happened

Motilal Oswal said CG Power's second-quarter FY27 result beat its estimates, helped by strong order inflow and revenue growth in power systems and better margins in its industrial segment. Consolidated order inflows rose 85% year on year to INR78b, and the order book, which means work already won but not yet billed, stood at INR236b, up 58%.

Confirmed

Global impact / market context

Faster order inflows and a larger order book give CG Power more future revenue to convert into sales, while price rises and higher factory utilisation can lift profit per sale, which means margin. Motilal Oswal raised its estimates and its target price to INR1,140 from INR1,020.

Analyst inference

The stock trades at high price-to-earnings multiples, which means investors pay a lot for each rupee of expected profit, leaving less room for disappointment. The broker expects capacity expansion, industrial demand recovery and narrower CG-SEMI losses to support growth.

Analyst inference

What to watch

1. Order inflows rose 85% year on year to INR78b, and the order book reached INR236b, up 58%, which means work won but not yet billed. Watch whether this pace continues, since slower inflows would reduce future revenue visibility. Confirmed
2. Motilal Oswal plans to rely on recent power systems capacity expansion for transformers and switchgear, price rises, industrial demand recovery and reduced CG-SEMI losses by FY28 to drive results. Proposed
3. High price-to-earnings multiples of 78.4x for FY27 mean investors expect strong profit growth. If margins weaken or orders slow, the share price could fall as expectations reset. Analyst inference

Evidence

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