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Informist, Wednesday, Jul. 23, 2025

By Rajesh Gajra

NEW DELHI - CG Power and Industrial Solutions Ltd. is likely to report strong on-year growth in its top line for the June quarter on the back of execution of orders. However, the operating margin is seen contracting as a notable part of the revenue growth would come from low-margin contracts from Indian Railways. The operating profit is likely to rise in line with revenue growth and the bottom line growth will largely track the growth in operating profit.

The increasing revenue share of railways business was one of three key reasons behind the decline in earnings before interest and tax margin of CG Power in 2024-25 (Apr-Mar). At a conference after the March quarter earnings, the management had said the company was "serious and committed for Indian Railways" and revenue from the railways business had risen in high double digits in FY25.

The consolidated net profit of the company is seen in the range of INR 2.71 billion to INR 2.98 billion, up 12-24% on year, according to estimates by three brokerages. Sequentially, the net profit change ranges from -0.4% to 9.7%. The lowest net profit estimate is by Kotak Securities' institutional equities division, while the highest is by Nuvama Wealth Management. The third brokerage, Nomura Equity Research, said CG Power's consolidated net profit is likely to be INR 2.87 billion, up 19% on year and 5.6% sequentially.

The consolidated revenue of the company is seen ranging from INR 27.14 billion to INR 28.16 billion, up 22-26% on year. The on-quarter change ranges from -1.4% to 2.3%. Kotak Securities has the lowest estimate while Nuvama has the highest. Nomura estimates the revenue at INR 27.39 billion, up 23% on year and down 0.5% sequentially. The company's earnings before interest, tax, depreciation and amortisation will likely range between INR 3.65 billion and INR 3.77 billion.

In the March quarter, the consolidated net profit of CG Power had risen 16% on year and 13% sequentially to INR 2.72 billion. The consolidated revenue from operations in that quarter had risen 26% on year and 9.4% on quarter to INR 27.53 billion. At the current price of around INR 682, shares of the company are up 14% from the closing price of INR 598.45 on May 6, the day the company announced its June quarter earnings during market hours.

The on-year growth trajectory in the power transmission and distribution business will continue in the June quarter, helped by a strong demand environment, and benefiting growth and profitability in CG Power's power segment, Kotak Securities said in its preview report. CG Power will likely report strong on-year growth in both segments-power systems and industrial systems--in the June quarter amid strong order inflows in the power systems business and railways business in industrial systems segment, the brokerage said.

CG Power's order inflow for the June quarter will likely be strong on the back of a large order it got in mid-June from Power Grid Corporation of India Ltd. The order is valued at INR 6.41 billion and is for the supply and servicing of 765 kV transformers. The on-year growth in order inflow is seen at 17% by brokerage Nomura while it is estimated to be 22% by Nuvama. Sequentially, however, Nomura sees it declining 3.2% and Nuvama expects it to be flat.

According to Kotak Securities, the EBITDA margin of CG Power will likely contract 130 basis points on year to 13.4% in the June quarter. Nomura sees the EBITDA margin contracting 91 basis points on year on account of a high base from the year-ago quarter and moderation of pricing power. "Given higher competitive intensity in short-cycle LT motors segment, CG Power may find it challenging to raise its current industrial (segment) margin levels," Nuvama said in its preview report.

The company will announce its June quarter financial results on Thursday. Post the earnings, investors will watch out for the management's commentary on inorganic opportunities, demand outlook for short cycle products, and an update on capital expenditure plans for its semiconductor business.

At 0953 IST, shares of CG Power were down 0.2% at INR 682.30 on the National Stock Exchange. The company's shares currently have four buy recommendations by brokerages at an average target price of INR 747. There are no hold calls or sell recommendations for the stock.

Following are the June quarter consolidated earnings estimates for CG Power based on reports from three brokerage firms in descending order of estimate of net profit:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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