Multibagger stock: CG Power share price rallies over 250% in two years. More steam left?

Multibagger stock: CG Power and Industrial Solutions share price have soared by more than 250% in the last two years. Shares of CG Power, an engineering company with an extensive and broad array of products, solutions, and services for power and industrial equipment, has gained 106.03% from 52-week low of ₹359.2 on October 26, 2023.

CG Power share price today rose over 1%, the stock opened at ₹744.75 apiece on the BSE. CG Power share price has been witnessing profit booking since the last few sessions; however, the primary trend is positive, and any further dip would be a buying opportunity. 700 is support, while 780–800 is resistance, said Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One.

Recently, Equirus Securities, after studying the company's annual report, claimed that CG Power saw a healthy 25% gain in orders in FY24, driven by a 43% increase in Power Systems. Higher realisations, a better product mix, and the execution of higher-margin export orders all helped to boost Power Systems' profit margins. However, pricing challenges in LT motors impacted Industrial Systems' profitability.

The firm has already achieved substantial headway in international markets, notably with transformers and switchgear. The motors industry hopes to emulate this performance as more capacity comes online over the next 12-24 months.

The brokerage house emphasised that the company's development strategy for the next 4-5 years, foraying into semiconductors by establishing an OSAT facility, and new product releases will benefit the business.

Crystal clear growth strategy for next 4-5 years

The brokerage stated that the firm has navigated successfully over the previous three years, returning to its former glory and beyond. In addition to previously announced capex in FY23, the company has announced a new capex of ₹2.20 billion, which includes: (a) ₹0.35 billion for MV/HT Motors (capacity expansion from 1,002 to 1,728 p.a.), (b) ₹1.55 billion for Instrument Transformers, Condenser Bushings, MV Switchgears, and GIS, and (c) ₹0.31 billion for Power Transformers (capacity expansion from 25,000MVA to 35,000MVA). These facilities aim to reduce per unit production costs by leveraging a large manufacturing base, thereby placing the company to compete in global markets against Chinese competitors.

“With a more focused approach, CGPOWER aims to increase revenue contribution from exports to 20% over next 4-5 years from 7% in FY24,” the brokerage said.

Foraying in semiconductors by setting up an OSAT facility

The company, which is working in partnership with Renesas Electronics and Star Microelectronics, would invest ₹76 billion (with government funds covering 75% of the cost) over five years to create an OSAT facility. The plant will produce a variety of products, including classic packages like QFN and QFP and modern packages like FC BGA and FC CSP.

New product launches and approvals to enhance total addressable markets

The firm has continued to (a) introduce new products, (b) get crucial approvals, and (c) explore new applications in Transformers, MV/HV Switchgears, Industrial Motors, Railway Products, and Consumer Products.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.