Why CG Power Share Price is Rising

The stock market is often a reflection of a myriad of global and local economic forces.

In recent months, the Indian stock market, for instance, has showcased a unique dance, largely impacted by global economic shifts. The pendulum has swung both ways, from enthusiasm to caution.

Amid this, a compelling observation stands out: the broader sectors, particularly the midcap segment, has exhibited remarkable resilience against global downturns, consistently outstripping the gains of the benchmark Nifty index.

As of 23 November 2023, the Nifty 50 index has returned 8.7% year-to-date, while the Nifty Midcap 100 index has returned 24.3%.

From the list of midcap stocks, CG Power and Industrial Solutions has garnered considerable attention, marking new highs with an impressive surge of 20% over the past two trading days.

Here's why shares of the company have been on a roll.

#1 Semiconductor Foray

Shares of CG Power extended its rally to the second consecutive day, rallying over 6% on 23 November 2023.

This positive momentum followed the company's submission of an application to establish an outsourced semiconductor assembly and test facility in India, involving an investment of around US$ 791 million (m) spread over five years.

The financing for this project is anticipated to be a combination of subsidies, equity contributions from joint venture partners, and necessary debt.

CG Power formally applied with the Ministry of Electronics and Information Technology (MeitY), seeking approval for the creation of an Outsourced Semiconductor Assembly and Test (OSAT) facility, along with a subsidy grant for the initiative.

The company plans to execute this venture as a joint effort, collaborating with technology providers and anchor customers, with ongoing discussions in progress.

It's noteworthy that CG Power is part of the Murugappa Group, a conglomerate with leadership positions in diverse product lines such as Abrasives, Technical Ceramics, Auto Components and systems, and Solutions for Railways.

The group has established robust alliances with international entities, including Groupe Chimique Tunisien, Foskor, and Mitsui Sumitomo, among others.

Operating across India and in over 50 countries, the group's varied businesses cater to a wide customer base.

#2 Robust Q2 results

For the September 2023 quarter, the company reported a 19.5% YoY jump in revenue at Rs 20 bn.

Notably, the company achieved a remarkable 37% growth in net profit, amounting to Rs 2.4 bn during the same quarter, primarily driven by increased revenues.

In comparison, the company had reported a profit of Rs 1.8 bn in the corresponding quarter of the previous year.

Margins were higher year-on-year on account of the execution of export orders with better margins and lower finance costs.

The order intake for the quarter was Rs 22.3 bn, a 22% growth (YoY). The unexecuted order book at the end of the quarter was Rs 52.3 bn, 44% higher.

What Next?

On the back of strong demand, CG Power's board has approved an expansion of its three manufacturing units.

It decided to expand the capacity of switch gears at the Nashik plant for Rs 1.6 bn and power transformers at the Bhopal plant at Rs 310 m for the addition of 10,000 MVA capacity. It also decided to ramp up HT motors at Bhopal.

This expansion is expected to boost the manufacturing capacity of LIM from 1,002 units per annum to 1,728 units per annum.

As part of its future growth strategy, CG Power and Industrial Solutions will expand capacity by investing Rs 4 bn over the next two years.

The firm plans to increase export revenue by 5-20% over the next 4-5 years.

Further, the centre announced the ambitious Semicon India Program under the India Semiconductor Mission (ISM) in December 2021 for developing the semiconductors and display manufacturing ecosystem in India. This program has a financial outlay of Rs 760 bn.

In addition to the Semicon India Programme, the government is launching the Design-led Manufacturing (DLM) Program to promote the design and manufacturing of semiconductors in India.

How CG Power Shares have Performed Recently

CG Power shares have gained 21% in the last two days and more than 70% in 2023 so far.

The company touched its 52-week high of Rs 503.5 on 23 November 2023 and its 52-week low of Rs 247.55 on 26 November 2022.

About CG Power

CG Power and Industrial Solutions Limited, formerly known as Crompton Greaves Limited, is a multinational engineering conglomerate based in Mumbai, India.

Since its establishment in 1937, CG has developed a diverse range of products, services, and solutions for power and industrial equipment.

With offices and manufacturing facilities in over 40 countries, CG has a global presence.

CG provides a comprehensive suite of solutions for power transmission and distribution, including power cables, switchgear, and substation automation systems.

CG offers a range of electrical and mechanical solutions for the industrial sector, including motors, drives, pumps, and control systems.

For more details, see the CG Power & Industrial company fact sheet and quarterly results.

You can also compare company with its industry peers:

CG Power & Industrial vs TD Power

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