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HomeMarket NewsCG Power shares in focus after UBS raises price target, says 'worst is largely behind'
A strong cash position, post its QIP, supports the company's product portfolio expansion, while its outsourced semiconductor assembly and test (OSAT) unit, although blackened, remains scalable over time, according to the brokerage.
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Shares of CG Power and Industrial Solutions Ltd. are in focus on Monday, March 23, as brokerage firm UBS is positive on the stock as it raised its price target by 7%.
UBS maintained its "buy" rating on CG Power and has raised its target price to ₹900 per share from ₹840 apiece. This implies an upside potential of 32% from its previous close.
The brokerage is of the view that CG Power is at an inflection point, with the worst of its industrial weakness across orders, margins and rail executions largely behind it.
CG Power is well-positioned in the power segment, with timely capacity expansion and improving export visibility, UBS said.
A strong cash position, post its QIP, supports the company's product portfolio expansion, while its outsourced semiconductor assembly and test (OSAT) unit, although blackened, remains scalable over time, according to the brokerage.
CG Power's third quarter earnings were largely in-line on revenue estimates but missed profit and margin expectations. Its overall margins contracted due to the continued investments in the semiconductor business, which continued to be loss-making.
CG Power's semiconductor segment had reported an EBITDA loss of ₹40 crore in the third quarter compared to a loss of ₹21 crore in the previous quarter.
In January, CG Power's CEO and managing director Amar Kaul had told CNBC-TV18 that exports remained a key growth area for the firm, with export margins higher than those of domestic orders.
However, UBS on Monday said that while scaling industrial exports may remain challenging for CG Power, the domestic cycle, led by rail and industrial motors, is increasingly looking better over the next 12 months.
Of the 17 analysts who have coverage on the CG Power stock, 13 have a 'buy' rating, one has a 'hold' rating and three have 'sell' ratings.
CG Power shares ended the previous session 0.8% lower at ₹681 apiece. The stock has declined 11.9% in the past month but has gained 6.8% this year, so far.
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