Motilal Oswal has increased its price target for CG Power and Industrial Solutions to INR 1,020 following the launch of a new transformer facility. The Sehore plant boosts manufacturing capacity, supporting a projected 32% revenue growth in the power division through FY29. Investors are balancing strong core demand with the long-term capital needs of the company's semiconductor expansion.
Brokerage firm Motilal Oswal has raised its price target for CG Power and Industrial Solutions to INR 1,020, citing a significant boost in the company's manufacturing strength. The update follows the successful commissioning of a greenfield transformer facility in Sehore, Madhya Pradesh, which was completed in 13 months. This new plant adds 45,000 MVA (Megavolt Amperes) of capacity, bringing the company’s total manufacturing capability to 120,000 MVA.
The capacity expansion is central to the firm's growth outlook. With this infrastructure now operational, analysts expect the company's power systems division to achieve a compound annual growth rate of 32% between FY26 and FY29. This growth projection reflects the company's ability to capture rising demand for power equipment across the country.
Beyond the traditional power business, the company is actively executing its strategic pivot into the semiconductor industry. The CG Semi unit is building an OSAT (Outsourced Semiconductor Assembly and Test) facility in Sanand, Gujarat. This segment is currently in the investment phase, with management targeting an EBITDA break-even point by FY28. While this venture is a significant long-term growth opportunity, it requires substantial upfront capital, which may influence the company's financials in the near term.
Investors should consider the financial trade-offs inherent in this growth strategy. Moving into the semiconductor space involves heavy capital spending, which can temporarily increase debt pressure and compress free cash flow. Additionally, while the core power business is performing well, the industrial systems segment is navigating a competitive environment, and any sharp volatility in global raw material costs could impact profit margins.
Execution remains a critical monitorable for shareholders. While the Sehore plant was delivered on an efficient timeline, the ongoing success of the semiconductor project will depend on meeting construction and commercialization targets without significant cost overruns. Moving forward, stakeholders may track the progress of the Sanand facility, the health of the company's order book, and the company's ability to maintain healthy margins while funding these large-scale expansion projects.