This Murugappa Group stock hit Rs 1-trn m-cap; zoomed 108 times in 4 years

CG Power stock up date: CG Power hit a new high of Rs 669.05, as they rallied 6% on the BSE in Friday's intra-day trade and saw its market capitalisation touch Rs 1.02 trillion mark.

Shares of CG Power and Industrial Solutions hit a new high of Rs 669.05, as they rallied 6 per cent on the BSE in Friday’s intra-day trade, which in turn also helped its market capitalisation (market cap) cross Rs 1 trillion mark for the first-ever time to Rs 1.02 trillion.

At 10:07 am; the stock price of Murugappa Group Company was up 4 per cent with market cap of Rs 1 trillion. In comparison, the S&P BSE Sensex was up 0.07 per cent.

Thus far in the calendar year 2024, CG Power has outperformed the market by surging 47 per cent, after the company had recorded 68 per cent rally in the previous calendar year 2023. In past four years, the stock price of CG Power has zoomed 108 times or 10,709 per cent from level of Rs 6.19. While, it has skyrocketed 14,165 per cent from the March 2020 low of Rs 4.69.

In last financial year 2023-24 (FY24), CG Power received approval from the Union Cabinet under India’s Semiconductor scheme to set up an Outsourced Semiconductor Assembly and Test (‘OSAT’) facility at Sanand, Gujarat.

The estimated investment for the project over a period of five years is Rs 7,600 crore and the same is expected to be funded by a combination of government subsidies, equity contribution and potential bank borrowings as required. Renesas Electronics Corporation, Japan and Stars Microelectronics, Thailand are the Technology and Joint Venture partners.

CG Power, a subsidiary of Tube Investments of India, is a leader in the Electrical Engineering Industry and has two business lines - Industrial Systems and Power Systems. It manufactures Traction Motors, Propulsion systems, Signaling Relays etc., for the Indian Railways, and wide range of Induction Motors, Drives, Transformers, Switchgears, and other allied products for the Industrial and Power sectors. Recently, the company also made a foray into the business of Consumer Appliances such as Fans, Pumps and Water Heaters.

In August 2020, the parent won the bid to acquire a controlling stake in CG Power. The company has repaid its entire debt and has become a gross debt-free company.

The Government of India’s infrastructure push with a massive capital allocation will open enormous growth opportunities for CG. The company’s renewed focus on mining growing global opportunities and leverage China + 1 strategy of global OEM will aid sustained growth. Long term service contracts, spare modules for older installations and life assessment and enhancement programs for supplied material open high margin service business opportunity, the company said.

Indian Railways (IR) plans to achieve 100 per cent railway route electrification by 2024-25. IR plans to establish ~500 multi-modal cargo terminals under the ‘PM GatiShakti’ programme, with an estimated outlay of Rs 50,000 crore in four-five years. On power transformers segment, Tariff Based Competitive Bidding (TBCB) projects worth Rs 200,000 crore are expected in the next 5 years.

CG Power is currently working towards increasing its power transformer unit capacity from 17,000MVA to 34,000MVA, and best utilises the elevated output for high-margin orders and export orders.

With a strong executable order book and commencement of supply for Vande Bharat from FY25 onwards, our outlook on CG Power is optimistic. The company’s focus on capacity expansion, supported by planned capex and healthy customer demand, should help in tapping into new business drivers and boost the performance. The industrial segment is also expected to rebound after the elections, analyst at Geojit Financial Services said. The stock, however, was trading above the brokerage firm’s target price of Rs 625 per share.