CGPOWER - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 3.8
| Stock Code | CGPOWER | Market Cap | 1,05,510 Cr. | Current Price | 670 ₹ | High / Low | 798 ₹ |
| Stock P/E | 87.5 | Book Value | 48.7 ₹ | Dividend Yield | 0.19 % | ROCE | 35.8 % |
| ROE | 26.0 % | Face Value | 2.00 ₹ | DMA 50 | 633 ₹ | DMA 200 | 671 ₹ |
| Chg in FII Hold | -1.00 % | Chg in DII Hold | 1.26 % | PAT Qtr | 337 Cr. | PAT Prev Qtr | 307 Cr. |
| RSI | 64.6 | MACD | -2.28 | Volume | 55,61,148 | Avg Vol 1Wk | 84,47,560 |
| Low price | 518 ₹ | High price | 798 ₹ | PEG Ratio | 2.84 | Debt to equity | 0.01 |
| 52w Index | 54.4 % | Qtr Profit Var | 38.1 % | EPS | 7.60 ₹ | Industry PE | 40.7 |
🔍 Analysis: CG Power shows strong efficiency metrics with ROCE at 35.8% and ROE at 26%, supported by EPS of 7.60 ₹. Debt-to-equity is very low (0.01), reflecting excellent financial stability. Quarterly PAT improved (337 Cr vs 307 Cr), with profit variation of 38.1%, indicating growth momentum. However, the stock trades at a high P/E of 87.5 compared to the industry average of 40.7, suggesting stretched valuations. Dividend yield is negligible at 0.19%. PEG ratio of 2.84 signals overvaluation relative to growth. Current price (670 ₹) is near DMA 200 (671 ₹), showing stability but limited upside compared to its 52-week high (798 ₹). RSI at 64.6 indicates the stock is approaching overbought territory.
💡 Entry Zone: Ideal entry would be in the 600–630 ₹ range, aligning with DMA supports. Deeper accumulation possible near 550–570 ₹ for margin of safety.
📈 Exit / Holding Strategy: If already holding, maintain position for 2–4 years given strong ROE/ROCE and low debt. Consider partial exit near 780–800 ₹ resistance if valuations stretch further without earnings support. Long-term investors should monitor PEG ratio and quarterly profit trends for sustained compounding.
🌟 Positive
- Strong ROCE (35.8%) and ROE (26%)
- EPS at 7.60 ₹ supports earnings visibility
- Low debt-to-equity (0.01), excellent balance sheet
- Quarterly PAT growth (337 Cr vs 307 Cr)
- DII holdings increased (+1.26%)
⚠️ Limitation
- High P/E (87.5 vs industry 40.7)
- PEG ratio (2.84) signals overvaluation
- Dividend yield negligible (0.19%)
- RSI at 64.6 indicates near overbought zone
- FII holdings reduced (-1.00%)
📉 Company Negative News
- Valuation stretched compared to industry peers
- Foreign institutional investors reduced stake
📈 Company Positive News
- Strong efficiency metrics (ROE, ROCE)
- Quarterly profit growth supports momentum
- DII stake increased, showing domestic confidence
🏭 Industry
- Industry PE at 40.7, much lower than CG Power’s valuation
- Power and engineering sector benefits from infrastructure growth and industrial demand
✅ Conclusion
CG Power is a moderately strong candidate for long-term investment. Strong ROE, ROCE, and low debt support fundamentals, but high P/E and PEG ratio limit valuation comfort. Ideal entry is near 600–630 ₹ for margin of safety. Existing holders should maintain for 2–4 years, with partial exit near 780–800 ₹ resistance if valuations outpace earnings growth.