CG Power shares surge 7% despite profit, margin miss; JPMorgan cuts target

Shares of CG Power and Industrial Solutions Ltd. were trading up as much as 7% on Wednesday, January 28, after the company reported its third quarter results that were largely in line on revenue but missed estimates on profit and margins.

Overall margins contracted during the quarter due to continued investments in the semiconductor business, which remained loss making.

The power systems segment led growth in Q3FY26, led by strong demand trends. Margin expansion in the segment was driven by improved price realisation and better operating leverage.

The industrial systems business reported steady sales growth, but margins came under pressure due to commodity cost headwinds.

Lower price realisation and an adverse product mix in the railway segment weighed on profitability. Margins in the motors business were also impacted as significant commodity inflation could not be fully passed on to customers.

The semiconductor segment reported an EBITDA loss of ₹40 crore in Q3FY26, compared with a loss of ₹21 crore in the previous quarter.

'Exports a key growth driver'

Speaking to CNBC-TV18, Amar Kaul, managing director and CEO of CG Power, said exports remain a key growth area for the company, with export margins higher than those of domestic orders.

Export orders for the power systems business rose 50% YoY during 9MFY26, with the company seeing strong demand from global markets.

What brokerages are saying

UBS has maintained a 'Buy' rating on CG Power with a price target of ₹820. The brokerage said that order inflows, revenue and EBITDA were below its estimates by 15%, 0% and 4%, respectively.

New orders stood at ₹4,370 crore, while the order backlog rose 62% YoY to ₹15,750 crore.

UBS said management attributed the 16% order growth in power systems to seasonal volatility, adding that underlying transformer demand and the order pipeline remain strong.

In the LT motors segment, the company has taken cumulative price hikes of 17% in FY26 to offset commodity inflation, which has been absorbed by the market.

On capacity expansion, UBS mentioned that the 40,000 MVA greenfield transformer project is running ahead of schedule and could be fully commissioned a year ahead of the FY28 target, with an additional 20,000 MVA capacity expected to come online over the next 2 to 3 quarters.

Nomura has also retained a 'Buy' rating with a target price of ₹820. The brokerage said the order pipeline is up 50% YoY and the strong order book provides multi quarter revenue visibility.

However, EBITDA came in 9% below estimates as commodity cost pressures impacted industrial systems margins.

Nomura cut its EPS estimates by 7 to 9% due to commodity headwinds and front loaded costs, while pegging FY26F to FY28F EPS CAGR at 32%.

The CG Power stock is currently trading at 40x FY28F EPS.

JPMorgan has an 'Overweight' rating on the stock but cut its price target to ₹698 from ₹840.

The brokerage said that commodity price pressures in the industrial business led to a 65 bps YoY and 38 bps QoQ decline in consolidated EBITDA margin to 12.5% in Q3FY26.

Consolidated order inflows of ₹4,370 crore were flat YoY and 7% below JPM estimates, which it termed as a key disappointment.

However, JPM said that CG Power continues to see healthy demand across power transformers, distribution transformers and switchgears in India, strong growth in exports with 9MFY26 export orders up 50% YoY, and increasing traction in large global markets such as US data centers, as reflected in recent order wins.