CG Power Q2 Results: Earnings beat across the board; Capacity expansion approved

Shares of CG Power & Industrial Solutions Ltd. recovered from the lows of the day but are witnessing volatile moves after announcing its September quarter results on Friday, October 23.

CG Power's revenue for the quarter grew by 30.1% from last year to ₹3,802 crore, higher than the CNBC-TV18 poll figure of ₹3,559.4 crore. The company had reported a topline of ₹2,923 crore last year.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for the quarter grew by 43.1% on a year-on-year basis to ₹539.6 crore from ₹377 crore earlier. The figure was also well above the CNBC-TV18 poll estimate of ₹444.4 crore.

EBITDA margin for the quarter expanded by 130 basis points from last year to 14.2% from 12.9% a year earlier, while the CNBC-TV18 poll estimate had expected a margin contraction to 12.5%.

Additionally, the board has also announced a capacity expansion plan of its power transformer facility, which is operating at its maximum capacity. The company undertook initiatives and has decided to increase the capacity by 10,000 MVA in the existing facility.

The total estimated investment for this capacity expansion is ₹68 crore and is likely to be completed within 12-15 months, which can significantly enhance the manufacturing capacity and enable the business to meet growing market demand and strengthen its competitive position, the company said in a release.

The earnings release further stated that in order to cater to the increasing order pipeline and growing demand for EHV products and in order to cater to the growing domestic and export demand, the board has approved an investment of ₹300 crore to enhance the manufacturing capacity of OIP bushings and instrument transformers in Ambad, of up to 800 kV, by 4,236 equivalent units per year. The project will likely commence operations within 30-36 months.

CG Power has also enhanced the capex needed for the GIS brownfield project at Vilholi in Nashik from ₹35.17 crore earlier to ₹44.62 crore. Nearly 90% of these projects' assets are likely to be transferred to the Greenfield facility upon commissioning.

After recovering from the lows of the day, shares of CG Power are witnessing that recovery getting sold into. The stock now trades 1.6% lower at ₹803.65. The stock is up 25% so far this year.