Motilal Oswal Bullish on CG Power and Industrial Solutions, Sees Target Price of Rs 940

CG Power and Industrial Solutions Posts Strong FY26 Results, Reiterates BUY Rating

CG Power and Industrial Solutions has reported its FY26 results, with revenue and EBITDA coming in line with expectations. The company's order inflows for the year remained strong at INR196 billion, a 34% year-over-year increase, primarily driven by strong inflows in the power systems division. This division's performance remained robust, driven by a healthy demand environment, pricing power, and efficient execution. The company's capacity will increase to 1,10,000 MVA after the current ongoing capital expenditure (capex).

The industrial systems division, however, saw relatively weaker inflows and revenue, although price hikes of nearly 17.5% taken during the entire year helped in passing through raw material (RM) cost inflation. The company expects losses from the OSAT (Optical, Sensor, Actuator, and Touch) division to begin narrowing down from FY28, as the second phase of capacity expansion would be completed by the end of CY26.

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The outlook for CG Power and Industrial Solutions remains positive, with the company expected to benefit from strong pricing power in the power systems segment, the ability to pass through RM cost pressures in industrial systems, and the narrowing of losses from the OSAT division. As a result, the company is expected to see margin improvement from FY28.

The stock is currently trading at 81.3x/60.7x price-to-earnings (P/E) on FY27E/FY28E earnings per share (EPS). Based on this, the research team has rolled forward its so-called "sum of the parts" (SoTP)-based target price (TP) to Jun'28 and reiterated a BUY rating with a TP of INR940. The team ascribes a 58x multiple for the power systems business, which bakes in the upcoming large capacity in the power systems segment and also some discount to multinational corporation (MNC) players. A 55x multiple is ascribed to industrial systems, which is at a 10% discount to ABB. The value of the OSAT business is ascribed via discounted cash flow (DCF) analysis to capture the benefits that will start accruing from FY28.