Whalesbook
IIFL Institutional Equities is highlighting selective opportunities in the capital goods and power equipment sectors, even as inflation in copper prices ripples through the industrial value chain. Renu Baid Pugalia, Senior Vice President of Research at IIFL, sees CG Power and Industrial Solutions as a compelling investment in its current "value zone." She points to strong structural growth drivers, noting the company's cost leadership in transformer manufacturing. CG Power has significantly expanded its capacity and is set to commission a new greenfield plant in late 2026, backed by a substantial order book. A recent ₹900 crore order from a U.S. data center further bolsters its export focus and entry into the competitive private U.S. market.
Navigating Commodity Inflation
The surge in copper prices presents a mixed picture across India's industrial and power equipment manufacturers. Baid explains that companies like CG Power, which primarily serve government utility contracts, are largely shielded. Their contracts typically include price variation clauses, insulating them from the direct impact of raw material cost inflation on grid equipment and transformers. This contrasts with companies exposed to short-cycle industrial businesses, where passing on price hikes is more challenging.
Sector-Specific Pressures
While CG Power's core segments remain robust, other industrial manufacturers, including segments within ABB and Siemens India, are facing margin pressure this quarter. A soft demand environment in certain industrial segments makes immediate price adjustments difficult. In the fast-moving electrical goods (FMEG) sector, the impact varies. Wires and cables manufacturers, such as Polycab India and Havells India, have demonstrated an ability to pass on cost increases swiftly due to market maturity. However, segments like fans and air conditioners are experiencing margin compression due to weak consumer demand, competitive pressures, and high inventory levels.
Technology Sector Outlook
Shifting to the technology space, IIFL's Baid expresses strong optimism for Netweb Technologies India. The company is exceptionally well-positioned to benefit from India's National AI Mission. Baid projects Netweb could capture a significant 50% to 60% share of the ₹10,000 crore sovereign AI infrastructure opportunity over the next three years. With a robust order book exceeding ₹2,100 crore and strong execution capabilities, the firm anticipates revenue growth of 40% to 50%. Earnings per share are forecast to more than double, rising from ₹40 in FY26 to ₹90 by FY28. The analysis suggests that while the grid equipment sector faces justified valuation corrections and potential moderation from new capacity and competition, specific technology plays offer substantial upside.