Ambit turns bearish on CG Power, Siemens; ABB gets Buy call; here's why

Ambit warns of weak demand, global competition, and margin risks for CG Power, Siemens

Concerns over narrowing demand-supply mismatch, and increased competition from global players may threaten earnings growth for electrical equipment suppliers over the next two-three years, caution analysts at Ambit Institutional Equities.

 

They believe that despite the correction in valuation multiples from September-October 2024 highs, there are downside risks to consensus estimates, particularly CG Power, and Siemens.

 

"The companies have passed margin peaks and won’t return to peak soon. We expect the return on capital employed (RoCE) to decline for all from the highest levels in FY24 as margins normalise, with a bigger decline for CG due to higher investments and lower margins (from over 40 per cent in FY24 to around 23 per cent in FY28),” the brokerage said in a recent report.

Ambit Institutional on CG Power, Siemens, ABB India

Ambit Institutional Equities has initiated coverage on ABB India stock with a ‘Buy’ rating a share price target of ₹6,200, translating into around 15 per cent upside.

 

The brokerage, however, has initiated coverage on Siemens shares with a ‘Sell’ rating and a target price of ₹2,900, implying a 13 per cent downside.

 

Similarly, Siemens Energy India, and CG Power and Industrials have been assigned ‘Sell’ ratings with target prices of ₹3,300 (6 per cent downside) and ₹650 (18 per cent downside), respectively. 

Why is Ambit bearish on electrical equipment stocks?

1) Execution delays, lower demand 

According to Ambit Institutional analysts, the government has reduced high voltage (HV) transformation capacity target for FY26 (for 220kV-765kV) from 198GVA to 126GVA.

 

This, the brokerage said, shows delays in execution, largely on the back of land acquisition and right-of-way (ROW) issues.

 

Add to it, Battery Energy Storage Systems (BESS) is being ramped up which significantly reduces the need for capital expenditure on new transmission infrastructure by improving the efficiency and capacity of the existing grid.

 

This means there would be less requirement of transmission infra and more efficient utilisation of existing infra.

 

That apart, the Ministry of Power approved an expanded Viability Gap Funding (VGF) Scheme for 30GWh of BESS in Junee 2025, amounting to ₹5400 crore. This is in addition to the previous 2023 scheme, which supported 13.2GWh, reflecting growing policy momentum to accelerate energy storage infrastructure.

 

Additionally, inter-state transmission services (ISTS) charges have been waived for BESS and Pumped Hydro Storage until June 2028.

 

“India is rapidly increasing the number of hybrid (renewable energy + battery storage) tenders to increase the share of renewables in total power generation. The execution, underbidding, delays in PPAs, and grid connections are risks,” Ambit said.

 

It added: We believe the installations could well run into the 2027-2032 plan with a CAGR of ~21 per cent over FY25-28, and then plateau until FY32. This is assuming that FY32 targets are met 100 per cent (which is another risk).

2) Competition from global players 

Analysts at Ambit Institutional Equities believe competition from global players is increasing, particularly in the LV & MV switchgear and LV motors markets.

 

Players like Schneider, Eaton, Nidec, and Delta Electronics are expanding their presence in India, adding to competitive pressures. Schneider, Ambit noted, seems more focused on India compared to Siemens and ABB.

 

Notably, Schneider announced in December 2024 that it is investing Rs 3200 crore in India by 2026, expanding the capacity by 2.5-3x in India. 

3) Margin, RoCE growth may slowdown 

Prices of switchgear and transformer increased massively due to a demand-supply mismatch worldwide.

 

While many players are increasing capacities, which are under construction and should come online in the next 2-3 years, Ambit believes pricing power could come down over the long-term.

 

“We believe the price increases would be moderate with low to mid-single digits, depending on the product category and raw material/ components inflation. Though demand-supply gap in the market may continue, the exceptional price hike post-Covid would not be possible, it added.

4) Private capex muted 

Ambit notes that the central and state government capex were elevated in 1QFY26, primarily due to the base effect. Further, so far in FY26, the central government capex stood at ~25 per cent of its budgeted estimate (Rs11.21 trillion). However, in July’25, state government capex significantly moderated, driven by Uttar Pradesh and West Bengal.

 

Ambit noted that capacity utilisation levels have been around 75 per cent for a while, but the private capex has been muted.