Basic analysis of CG power

Basic analysis of CG power: Electricity consumption has been increasing since the Industrial Revolution and is expected to increase further as population, income, and economy grow. Engineering or capital goods support the establishment or production of goods on a large scale, and the companies we will look at are mainly involved in the production of electrical equipment. In this article, we will look at the fundamental analysis of CG Power & Industrial Solutions Ltd.

Basic analysis of CG power

Company Overview

CG Power was founded in 1937. Colonel REB Crompton founded the business in Chelmsford in 1878, later REB Crompton & Co. merged with F&A Parkinson Limited. CPL subsequently set up a wholly owned Indian subsidiary ‘Crompton Parkinson Works Ltd.’ and a sales organization ‘Greaves Cotton & Crompton Parkinson Ltd.’ in Mumbai.

The company was acquired by Indian industrialist Lala Karamchand Thapar. Thapar Group has established Crompton Greaves Limited to meet the electricity needs of the B2B and consumer sectors. The company has been involved in the manufacturing, sales and application of electrical energy. The company’s presence with 17 manufacturing facilities is spread across nine countries, including Asia, Europe and North America.

Transformers, switchgear, circuit breakers, network protection and control equipment, project engineering, HT and LT motors, drives, power automation products, turnkey solutions in these areas are all part of the company’s portfolio and improve many aspects of industry and personal life. . . The portfolio is divided into three SBUs: Industrial, Power and Railways.

Tube Investments of India Ltd. (TII), a Murugappa group company, has acquired a controlling stake in CG Power and Industrial Solutions Ltd.

segment analysis

Power Systems contributed 29.01% of the company’s revenue in FY23, Industrial Systems contributed 70.77% and Others contributed 0.23%. The proportion by region is 90.03% overseas and 9.96% domestically.

industry analysis

The capital goods industry accounts for 12% of India’s manufacturing output and 1.8% of GDP. The largest subsectors in India are electrical equipment, plant equipment, and earthmoving/mining machinery.

India’s electrical equipment market share is expected to grow by USD 33.74 billion from 2021 to 2025, at a CAGR of 9%. The domestic electrical equipment market is expected to grow at a CAGR of 12% to reach $72 billion by 2025. .

Electrical machinery and equipment shipments increased by nearly 90% to Rs. 13,606 billion (USD 1.6 billion) in April-July 2022, up from Rs. 7,202 crore (US$869 million) in the previous year.

CG power – finance

Sales and Net Profit

The operating revenue of the company was Rs. 6,972.54 crore in FY23 compared to Rs. It increased by 27.15% to ₹5,483.53 crore in FY22. However, the 5-year CAGR was -3.37%.

Net profit from continuing operations in 2023 was 100 billion won. 962.97 crore compared to Rs. 913.07 crore in FY22, an increase of 5.46%. Net income has fluctuated over the years, from losses in FY19 and FY20 to profits in late FY21. Net profit for FY22 and FY23 includes Rs. Discontinued operations amounted to $2834.6 billion and $1666.4 billion, respectively.

Some subsidiaries have been dissolved, profits have been made from land sales, and liquidation of some subsidiaries is in progress. CG Power Solutions Limited, CG Power Equipments Limited, PT Crompton Prima Switchgear Indonesia, CG Sales Network Malaysia Sdn. Bhd., QEI LLC is a subsidiary that was discontinued in FY23.

profit

The company’s OPM stood at 14.41% in FY23 compared to 11.79% in FY22. The five-year average was 6.95%. Margins are low in FY20 and selected for subsequent years, with the highest margin selected for the current year.

NPM stood at 11.42% in FY23 compared to 11.48% in FY22. The five-year average was 6.80%. Margins have fluctuated significantly. The increase in NPM in FY21 was due to an increase in exceptional items and changes in the treatment of deferred taxes.

rate of return

RoE stood at 53.77% in FY23 compared to 90.98% in FY22. Losses in FY20 left shareholder funds negative, and the fund broke even the following year, increasing returns exponentially in FY22. Lower interest costs helped the ratio. RoCE stood at 52.25% in FY23 compared to 43.58% in FY22. The average was 24.21%.

High ROE and RoCE in recent fiscal years indicate that the company has generated good returns on shareholders’ capital and has used its overall resources efficiently.

debt analysis

The negative average was due to negative shareholder funds due to losses for the year, which later rebounded to positive. As of FY23, the company’s debt has been completely reduced and the company’s debt to equity is zero.

Interest coverage was 65.50 times in FY23 compared to 10.23 times in FY22. Profits are up and interest expenses are down, putting the company in a good position to repay its debt.

key indicators

Let’s take a look at some of CG Power Ltd.’s key indicators.

Future Plans

• The company plans to expand its motor manufacturing capacity at its Ahmednagar and Goa plants and transformer manufacturing capacity at its Bhopal and Malanpur plants. These projects will cost a total of $400 million over the next two years.
• The company has announced that it will embark on a semiconductor assembly and testing project worth around Rs 6,500 crore and is seeking approvals and subsidies for the same.
• CG is exporting power transformers to upgrade power grids in emerging African countries from 132kV to 225kV and 330kV.
• We plan to expand the export market by establishing specific strategies for motors, alternators, drives, and automation. The company aims to strengthen its distribution network in North America, Europe, the Middle East, and Africa.
• CG Power is considering expanding its business in the cement, sugar, paper, steel and oil and gas sectors by developing higher value products in certain sectors.

conclusion

As we near the conclusion of the article, let’s take a quick look at the company. CG Power’s engineering sector has the potential to grow as consumption and the economy improve. However, capital goods companies achieve good results during the growth period thanks to various corporate investment plans and government support, but experience difficulties during the economic downturn. Taking advantage of opportunities at good times can help any company grow. What do you think about the potential of this company? Let us know your thoughts in the comments section below.

Written by Santosh

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