The stock surged 3.62% on October 29, 2025, closing at ₹748.70, reflecting investor confidence in the company's sustained growth trajectory. Revenue for the quarter reached ₹2,922.79 crores, marking a 1.55% sequential increase and a healthy 21.14% year-on-year expansion, underscoring strong demand momentum across CG Power's product portfolio.
The September 2025 quarter results reaffirm CG Power's position as a quality compounder in India's electrical equipment sector, with the company maintaining its track record of consistent profitability and strong balance sheet fundamentals. The stock has delivered phenomenal returns of 194.71% over the past three years and an extraordinary 2,399.83% over five years, significantly outpacing the Sensex's 41.76% and 113.83% returns respectively over the same periods.
Financial Performance: Navigating Growth Amidst Margin Normalisation
CG Power's Q2 FY26 financial performance presents a nuanced picture of sustained top-line momentum coupled with margin normalisation. Net sales of ₹2,922.79 crores represented a modest 1.55% sequential uptick from Q1 FY26's ₹2,878.05 crores, while the 21.14% year-on-year growth demonstrated the company's ability to capitalise on India's infrastructure and industrial capex cycle.
The operating profit (PBDIT) excluding other income stood at ₹376.71 crores, translating to an operating margin of 12.89%—a sequential compression of 36 basis points from Q1 FY26's 13.25%, but an improvement of 68 basis points compared to Q2 FY25's 12.21%. This margin trajectory suggests that while the company faces near-term headwinds from raw material costs and competitive pricing, it has successfully defended profitability through operational efficiencies and product mix optimisation.
Other income surged significantly to ₹66.10 crores in Q2 FY26 from ₹28.25 crores in the previous quarter, providing a substantial boost to overall profitability. The net profit margin expanded to 9.73% from 9.27% sequentially and 9.10% year-on-year, reflecting the company's improving earnings quality. Employee costs increased to ₹235.81 crores from ₹215.06 crores quarter-on-quarter, indicating strategic investments in talent acquisition and retention to support future growth.
| Quarter | Revenue (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 2,922.79 | +1.55% | 286.72 | +6.50% | 12.89% | 9.73% |
| Jun'25 | 2,878.05 | +4.55% | 269.23 | -1.01% | 13.25% | 9.27% |
| Mar'25 | 2,752.77 | +9.42% | 271.97 | +13.07% | 12.60% | 9.96% |
| Dec'24 | 2,515.68 | +4.27% | 240.53 | +8.86% | 13.16% | 9.45% |
| Sep'24 | 2,412.69 | +8.31% | 220.96 | -8.37% | 12.21% | 9.10% |
| Jun'24 | 2,227.52 | +1.63% | 241.14 | +3.23% | 14.68% | 10.83% |
| Mar'24 | 2,191.72 | — | 233.60 | — | 12.95% | 10.67% |
The quarterly trend analysis reveals a company in consistent growth mode, with revenue advancing steadily across seven consecutive quarters. Whilst operating margins have witnessed some volatility—ranging from 12.21% to 14.68%—the company has maintained profitability discipline. The sequential improvement in net profit despite a marginal decline in operating margin highlights effective cost management and favourable other income contributions.
Operational Excellence: Industry-Leading Return Ratios Justify Premium Valuation
CG Power's operational metrics stand out in the heavy electrical equipment sector, with the company delivering an exceptional average return on equity (ROE) of 36.30% and return on capital employed (ROCE) of 39.73%—metrics that significantly outpace industry peers. These elevated return ratios reflect the company's superior capital allocation capabilities, operational efficiency, and strong competitive positioning in high-value segments.
The latest ROE of 25.35% and ROCE of 54.26% underscore the company's ability to generate substantial returns for shareholders whilst maintaining disciplined capital deployment. With virtually no debt on its balance sheet—evidenced by a net debt-to-equity ratio of -0.43—CG Power operates as a net cash company, providing financial flexibility for growth investments and insulating the business from interest rate volatility.
Capital Efficiency: A Key Differentiator
CG Power's average ROE of 36.30% places it amongst the top performers in India's capital goods sector, demonstrating exceptional profitability relative to shareholder capital. The company's debt-free status and strong interest coverage ratio of 100x (average EBIT to interest) provide a robust foundation for sustained value creation. This combination of high returns and low leverage positions CG Power as a quality compounder worthy of premium valuations.
The balance sheet reflects a company in expansion mode, with fixed assets increasing to ₹1,479.02 crores in FY25 from ₹1,058.90 crores in FY24, signalling capacity augmentation to meet rising demand. Current assets of ₹5,251.33 crores and closing cash of ₹410 crores provide ample liquidity to support working capital requirements and strategic initiatives. Shareholder funds have strengthened to ₹3,843.95 crores, up from ₹3,017.44 crores in FY24, reflecting retained earnings and value accretion.
✓ Key Operational Strengths
Debt-Free Balance Sheet: CG Power operates with minimal debt (₹0.26 crores long-term debt) and net cash position, providing financial resilience and strategic flexibility.
Exceptional Return Metrics: Average ROE of 36.30% and ROCE of 39.73% demonstrate superior capital efficiency and profitability compared to industry peers.
Strong Cash Generation: Operating cash flow of ₹944 crores in FY25 reflects robust working capital management and earnings quality.
Industry Context: Riding India's Infrastructure and Industrial Capex Wave
CG Power operates in a structurally favourable environment characterised by India's ambitious infrastructure development agenda, accelerating industrial capex, and the ongoing energy transition. The government's focus on power generation, transmission and distribution infrastructure, coupled with rising private sector investments in manufacturing and data centres, has created robust demand for electrical equipment and solutions.
The company's diversified product portfolio—spanning transformers, switchgear, motors, and industrial systems—positions it to capitalise on multiple growth vectors. With India's power sector expected to witness substantial capacity additions and grid modernisation investments over the coming decade, CG Power stands to benefit from its established market presence and technical capabilities.
The heavy electrical equipment sector has witnessed margin pressure due to raw material inflation and competitive intensity, factors evident in CG Power's sequential margin compression. However, the company's ability to maintain operating margins above 12.5% whilst growing revenues demonstrates pricing power and operational resilience. The sector's long-term outlook remains positive, supported by government policy tailwinds and sustained industrial activity.
| Company | P/E (TTM) | P/BV | ROE (Avg %) | Div Yield | Debt/Equity |
|---|---|---|---|---|---|
| CG Power & Ind | 113.48 | 29.60 | 36.30% | 0.17% | -0.43 |
| Siemens | 58.12 | 9.00 | 12.96% | 0.39% | -0.48 |
| ABB India | 61.06 | 15.26 | 18.91% | 0.84% | -0.72 |
| Siemens Energy | 112.59 | 28.64 | 0.00% | — | 0.02 |
| BHEL | 285.19 | 3.34 | 1.32% | 0.22% | 0.06 |
| Suzlon Energy | 36.53 | 12.53 | 13.60% | — | -0.14 |
The peer comparison reveals CG Power's premium valuation relative to most competitors, with a P/E ratio of 113.48x and price-to-book value of 29.60x. However, this premium is justified by the company's significantly superior ROE of 36.30%—nearly triple that of Siemens (12.96%) and double that of ABB India (18.91%). The company's debt-free status further differentiates it from peers, providing greater financial stability and flexibility.
Valuation Analysis: Premium Justified by Quality, but Limited Upside at Current Levels
Trading at a P/E ratio of 113.48x and price-to-book value of 29.60x, CG Power commands one of the highest valuations in the heavy electrical equipment sector. The stock's classification as "Very Expensive" reflects the substantial premium embedded in current market prices. The EV/EBITDA multiple of 82.83x and EV/Sales of 10.62x further underscore the rich valuation landscape.
However, context is crucial when evaluating CG Power's valuation metrics. The company's exceptional ROE of 36.30% and consistent profitability track record provide fundamental support for premium pricing. The five-year sales CAGR of 23.34% and EBIT CAGR of 39.01% demonstrate sustained growth momentum that warrants above-market multiples. The company's transformation from a loss-making entity in FY20 to a profit-generating machine with ₹972 crores net profit in FY25 represents a remarkable turnaround story.
The stock currently trades at ₹748.70, approximately 7.72% below its 52-week high of ₹811.35 but 44.44% above its 52-week low of ₹518.35. This positioning suggests that whilst the stock has corrected from peak levels, significant upside from current valuations appears limited unless earnings growth accelerates materially. The minimal dividend yield of 0.17% indicates that total returns will primarily depend on capital appreciation driven by earnings growth.
"CG Power's premium valuation reflects not just current profitability, but the market's confidence in the company's ability to sustain industry-leading return ratios whilst capturing India's infrastructure growth opportunity."
Shareholding Pattern: Stable Promoter Base with Growing Institutional Interest
CG Power's shareholding structure reflects a stable promoter base with gradually increasing institutional participation. Promoter holding stood at 56.37% in September 2025, marginally declining from 58.05% in June 2025 due to a stake reduction of 1.67 percentage points. The majority promoter, Tube Investments of India Limited, holds 56.29%, providing strategic oversight and long-term commitment to the business.
| Shareholder Category | Sep'25 | Jul'25 | Jun'25 | QoQ Change |
|---|---|---|---|---|
| Promoter Holding | 56.37% | 56.38% | 58.05% | -1.68% |
| FII Holding | 13.02% | 12.68% | 12.69% | +0.33% |
| Mutual Fund Holding | 9.81% | 10.33% | 8.93% | +0.88% |
| Other DII Holdings | 6.45% | 6.00% | 5.30% | +1.15% |
| Non-Institutional | 14.35% | 14.61% | 15.03% | -0.68% |
Foreign institutional investors increased their stake to 13.02% from 12.69% in June 2025, signalling growing international confidence in the company's prospects. Mutual fund holdings rose to 9.81% from 8.93%, whilst other domestic institutional investors expanded their position to 6.45% from 5.30%, reflecting broad-based institutional accumulation. The total institutional holding of 29.28% indicates strong professional investor interest in the stock.
The absence of promoter pledging (0.0%) provides comfort regarding financial stability at the promoter level. The gradual decline in non-institutional holdings from 15.03% to 14.35% suggests profit-booking by retail investors at elevated valuations, a natural occurrence given the stock's substantial multi-year appreciation. Overall, the shareholding pattern reflects a healthy mix of committed promoters and quality institutional investors.
Stock Performance: Exceptional Long-Term Wealth Creation Despite Recent Consolidation
CG Power's stock performance over extended time horizons represents one of the most compelling wealth creation stories in India's capital goods sector. The stock has delivered phenomenal returns of 2,399.83% over five years, 194.71% over three years, and 94.75% over two years—vastly outperforming the Sensex's returns of 113.83%, 41.76%, and 33.26% respectively over the same periods.
| Period | CG Power Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +1.30% | +0.68% | +0.62% |
| 1 Month | +0.26% | +5.76% | -5.50% |
| 3 Months | +13.50% | +4.50% | +9.00% |
| 6 Months | +17.17% | +5.86% | +11.31% |
| Year-to-Date | +3.17% | +8.78% | -5.61% |
| 1 Year | +4.30% | +5.76% | -1.46% |
| 2 Years | +94.75% | +33.26% | +61.49% |
| 3 Years | +194.71% | +41.76% | +152.95% |
| 5 Years | +2,399.83% | +113.83% | +2,286.00% |
However, recent performance reveals a period of consolidation, with the stock underperforming the Sensex over the past year (+4.30% vs +5.76%) and year-to-date (+3.17% vs +8.78%). The one-month return of +0.26% compared to the Sensex's +5.76% indicates near-term underperformance as the stock digests previous gains and investors reassess valuations.
The technical picture shows a "Mildly Bullish" trend, with the stock trading above all key moving averages—5-day (₹729.39), 20-day (₹744.24), 50-day (₹737.53), 100-day (₹706.57), and 200-day (₹666.79). This positioning suggests underlying strength, though the stock faces immediate resistance around the ₹758-760 zone. The beta of 0.51 indicates lower volatility compared to the broader market, making CG Power relatively less risky from a price movement perspective.
Investment Thesis: Quality Compounder at Premium Valuation
CG Power's investment case rests on four pillars: exceptional financial quality, sustained growth momentum, strong competitive positioning, and a debt-free balance sheet. The company's proprietary Mojo Score of 71/100 places it in "BUY" territory, reflecting the balanced assessment of these factors against the backdrop of premium valuations.
The "Excellent" quality grade reflects the company's outstanding return metrics (ROE of 36.30%, ROCE of 39.73%), robust growth profile (23.34% sales CAGR, 39.01% EBIT CAGR), and pristine balance sheet with no meaningful debt. These fundamental strengths position CG Power as a long-term wealth creator capable of compounding shareholder value at above-market rates.
However, the "Very Expensive" valuation grade tempers near-term return expectations. At 113.48x trailing earnings and 29.60x book value, the stock prices in substantial future growth, leaving limited margin of safety for new investors. The positive financial trend and mildly bullish technical setup provide support, but meaningful upside will require earnings growth to catch up with valuations or a broader market re-rating of capital goods stocks.
Key Strengths & Risk Factors
✓ Key Strengths
- Exceptional Return Ratios: Average ROE of 36.30% and ROCE of 39.73% demonstrate superior capital efficiency and profitability.
- Debt-Free Balance Sheet: Net cash position provides financial flexibility and shields from interest rate volatility.
- Sustained Growth Momentum: Five-year sales CAGR of 23.34% and EBIT CAGR of 39.01% reflect strong execution capabilities.
- Market Leadership: Second-largest player in heavy electrical equipment with diversified product portfolio.
- Strong Institutional Support: 29.28% institutional holdings and no promoter pledging indicate quality investor base.
- Structural Tailwinds: Positioned to benefit from India's infrastructure capex, industrial growth, and energy transition.
- Consistent Profitability: Demonstrated ability to maintain margins above 12.5% whilst growing revenues.
⚠ Key Concerns
- Premium Valuation: P/E of 113.48x and P/BV of 29.60x leave limited margin of safety for new investors.
- Margin Pressure: Sequential compression in operating margin from 13.25% to 12.89% indicates competitive headwinds.
- Recent Underperformance: Stock has lagged Sensex over past 12 months, suggesting momentum loss.
- Raw Material Volatility: Exposure to commodity price fluctuations can impact profitability.
- Execution Risk: Ability to sustain high growth rates and maintain return ratios as scale increases.
- Limited Dividend Yield: 0.17% yield provides minimal income, making returns dependent on capital appreciation.
- Valuation Dependency: Stock performance highly sensitive to earnings growth delivery and multiple sustainability.
Outlook: What to Watch
Positive Catalysts
- Order Book Growth: Sustained order inflows indicating strong demand visibility.
- Margin Stabilisation: Sequential improvement in operating margins back towards 13-14% range.
- Capacity Utilisation: Higher utilisation rates driving operating leverage and profitability.
- New Product Launches: Innovation driving market share gains and pricing power.
- Export Growth: International market penetration diversifying revenue streams.
Red Flags
- Continued Margin Erosion: Further compression below 12.5% would signal competitive intensity.
- Revenue Growth Deceleration: Slowdown below 15% YoY would disappoint growth expectations.
- Working Capital Deterioration: Rising debtor days or inventory levels impacting cash flows.
- Promoter Stake Reduction: Further meaningful decline in promoter holding beyond current levels.
- Earnings Miss: Failure to meet market consensus estimates triggering valuation reassessment.
The near-term trajectory will largely depend on CG Power's ability to defend operating margins whilst sustaining revenue growth momentum. Management commentary on order book trends, capacity expansion plans, and margin outlook will be critical for investor confidence. The company's positioning in high-growth segments such as data centre infrastructure, renewable energy equipment, and industrial automation provides multiple avenues for sustained expansion.
From a broader market perspective, CG Power's performance will be influenced by the pace of India's infrastructure spending, industrial capex recovery, and global economic conditions affecting capital goods demand. The company's strong balance sheet and operational track record provide resilience against near-term headwinds, but valuation sensitivity remains a key consideration for investors evaluating entry points.
The Verdict: Quality Business, But Patience Required at Current Valuations
Score: 71/100
For Fresh Investors: CG Power represents a high-quality business with exceptional fundamentals, but current valuations of 113x P/E and 29.6x P/BV offer limited margin of safety. Consider accumulating on dips towards ₹680-700 levels for better risk-reward. The stock is best suited for investors with a 3-5 year horizon who can look through near-term volatility.
For Existing Holders: Continue holding with conviction. The company's debt-free status, industry-leading ROE of 36.30%, and exposure to India's infrastructure growth story support long-term wealth creation. Use any significant corrections as opportunities to average up rather than booking profits prematurely.
Fair Value Estimate: ₹720-750 based on sustainable earnings growth and sector multiples (Current Price: ₹748.70 | Limited upside in near term)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
