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Kotak Securities
CG Power (Accumulate)
CMP: ₹80.35
Target: ₹84
CG Power and Industrial Solutions Ltd, is part of The Avantha Group, one of India’s leading business conglomerates.
CG Power is India’s largest power equipment company.
The shares of CG Power and Industrial Solutions have corrected sharply since our previous update (dated May 29, 2017). We believe that currently at PER of 16.2x FY19 earnings, company’s stock is trading at reasonable valuation. We move recommendation to ‘Accumulate’ (Buy on declines) from ‘Sell’ earlier with unchanged target price of Rs 84.
CG Power and Industrial Solutions has accepted an offer for acquisition of the company’s US business (comprised in its subsidiary, CG Power Systems USA Inc). The proposed divestment (valued at EV of $37 million) is a part of company’s strategy of debt reduction and focussing on its core operations and core market in India. We, however, note that the stock movement would track successful divestment of remaining international business (mainly European business) in near/medium term.
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