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CG Power & Industrial Solutions Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤3rd Feb 26

Summary : CG Power delivered strong Q3 FY26 results with robust order growth, expanding margins, and positive outlook across key segments, driven by strategic investments and export focus.

Management Perspective positive : Management expressed pleasure with 'outstanding' Q3 results and 'all-time high' revenue. They are 'bullish' on power sector growth and 'confident' in future prospects. OSAT yields are 'much better than anticipated'.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 sales grew 22% YoY, PBT before exceptional items rose 35% YoY.
  2. PBT margin expanded 148 basis points to 15.6% of sales.
  3. Order backlog increased 66% YoY to INR 14,859 crore, ensuring future visibility.
  4. Power Systems sales surged 44% YoY; Industrials grew 8% YoY.
  5. Secured a record INR 900 crore power transformer export order for US data centers.

Future Growth Prospects

  1. Robust order backlog provides strong multi-quarter revenue visibility.
  2. Domestic power transmission business expected to grow beyond 2029.
  3. Semiconductor mini plant (M1) operational, larger plant (M2) by Dec 2026.
  4. Transformer capacity rapidly expanding from 20k MVA to 65k MVA soon.
  5. Export bookings for power sector increased over 50% in nine months.

Management Insights

  1. Pleased with outstanding Q3 results, reflecting operating discipline and strategic focus.
  2. Not seeing any slowdown in the power systems order pipeline.
  3. Focused on margin improvement through cost optimization, pricing, and product mix.
  4. Bullish on power sector growth, expecting sustained demand until 2029 and beyond.
  5. Confident in competing with any player, emphasizing operational efficiency and level playing field.

Signs of Skepticism

  1. Management's strong confidence in competing with potential Chinese entrants.
  2. Longer lead times for semiconductor (OSAT) business profitability.
  3. Acknowledged delays and 'leakage' issues in the railway segment.
  4. Impact of US duty structure on exports, though deemed momentary.

Risk Factors

  1. Commodity cost headwinds impacted Industrial segment margins.
  2. Lower price realization and product mix changes affected railway segment.
  3. Potential re-entry of Chinese players could increase market competition.
  4. Delays in Kavach product approval and passenger trials noted.
  5. Semiconductor business requires continued significant investment.

Good To Know

  1. Q3 exceptional items include new labor code impact from November 2025.
  2. Consolidated results include international subsidiaries and semiconductor ventures.
  3. Semiconductor segment incurred INR 41 crores impact on PBT.
  4. Kavach product approval and passenger trials are nearing completion.
  5. Brownfield switchgear expansion to add INR 400 crores incremental revenue.

Key Drivers

  1. Strong order backlog ensures revenue.
  2. Power sector capex drives demand.
  3. Semiconductor plant adds new revenue.
  4. Large export orders boost presence.

Key Analyst Discussions

Competitive Environment

  1. Concerns about potential Chinese players bidding for PSU tenders.
  2. Questions on pricing pressure from Chinese re-entry into market.
  3. Discussions on transformer industry capacity versus demand outlook.

Market Trends & Consumer Behavior

  1. Inquiries about demand recovery for LT motors.
  2. Outlook for domestic power transmission business beyond five years.

Financial Highlights

  1. Questions on Power Systems order intake growth momentum.
  2. Inquiries about motors segment volume growth versus price increases.
  3. Discussions on required price increases for commodity inflation.
  4. Analysis of PBIT margin drop in Industrial Systems and its drivers.
  5. Questions regarding profitability and price clauses for export orders.

Product Composition

  1. Updates on semiconductor (OSAT) facility ramp-up and sales.
  2. Questions on yields and deals from the OSAT mini plant.
  3. Status of Kavach product development and future order expectations.
  4. Progress on EV motor development for 3-wheelers and trucks.
  5. Details on switchgear business capex and revenue potential.

Strategic Considerations

  1. Opportunities for US data center export orders pipeline.
  2. Strategy for scaling up power sector exports to new geographies.
  3. Inquiries about export percentage of sales and growth.
  4. Capacity to deliver large data center orders from existing facilities.
  5. Impact of EU free trade agreement on product tariffs.