Analyst Concall
CG Power looks to set up units abroad to focus on exports
This story was originally published at 19:50 IST on 28 January 2025
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--CG Power: Power transformers biggest opportunity for growth globally
--CG Power: Have spare capacity in distribution transformers segment
--CONTEXT:Comments by CG Power mgmt in post-earnings analyst conference call
--CG Power:Investing more in railway pdts;seeing better execution in segment
--CG Power: Looking to open units overseas; location not final yet
--CG Power: Part of product portfolio localised at Bhopal facility
--CG Power: Looking to launch new motors every month going forward
--CG Power: Already spent INR 400 mln-INR 500 mln of capex
--CG Power: To begin strategic planning for 3-5 years from next month
By Aman Aryan and Sunil Raghu
MUMBAI – CG Power and Industrial Solutions Ltd. plans to set up new units and service networks for its power business in overseas geographies but is yet to finalise the locations for such units, the management said in a post-earnings call with analysts. This is part of CG Power's plan to increase the share of revenue from exports. The company had guided for a 20% share of exports in total revenue over the next 4–5 years. It did not reveal the export revenue for the December quarter.
Although the company earlier was not ready to export motors, it has included innovation as a key part of its strategy and is looking to launch a product every month, the management said. CG Power will start working on a 3-to-5 year strategy plan from next month and expects the planning to be completed in 3–4 months, the management said.
On Tuesday, CG Power reported its earnings for the December quarter. The company's consolidated net profit fell 68% on year despite booking a 27% on-year rise in revenue. Revenue from its power systems and industrials segments rose 42% and 21%, respectively.
CG Power said margins for its motors business improved slightly during the quarter owing to improved productivity and a better product mix. The management said both revenue and bookings for low-tension motors had gone up during the December quarter. Though the market is not very positive, it is also not bad and "we have found a way to find our piece of the pie and get it", it said.
The company's board has approved increasing its power transformers' capacity by 45,000 megavolt amperes. On a question relating to this expansion, the management said the company is yet to acquire land for the purpose. CG Power sees the biggest opportunity in the power transformers segment, but has spare capacity for distribution transformers, the management said. CG Power had earlier infused capital in the distribution transformers segment.
Talking about the outsourced semiconductor assembly and test business, the management said the company is looking to start a mini factory by the financial year 2025-26 (Apr-Mar) and a mega factory by FY27. "So, so a lot of action, a lot of work (is) going on the entire leadership team and the hiring of team is already on place (sic)," the management said. "They are getting right now trained across different places across the world wherever we have the tie-up with our partners." CG Power has already spent nearly INR 400 million-INR 500 million for the outsourced semiconductor assembly and test business, the management said.
The company has also been making efforts to localise production. CG Power has already localised the manufacture of some of its product portfolio at its Bhopal facility, the management said, adding that it is also looking to export from this unit. CG Power's market share has also expanded during the nine months ended December.
The company's industrial segment is skewed towards the railways, the management said, adding that the company had been investing a lot and executing orders much faster in the railways business. The management said the incremental orders from the railways are coming at better margins. However, the company's industrial systems segment's earnings before interest, tax, depreciation, and amortisation margin for the December quarter contracted 140 bps on year to 13.2% despite the product mix being skewed towards the railways. On Tuesday, shares of CG Power and Industrial Solutions closed at INR 574.95 on the National Stock Exchange, down 3.4%. End
Edited by Rajeev Pai
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