Nomura initiates coverage on CG Power, GE Vernova and Apar Industries with ‘buy’ rating, sees up to 49% upside

Japanese brokerage firm Nomura in its latest report highlighted that India’s power transmission sector is set for robust growth, fueled by rising electricity demand and ambitious targets for renewable energy capacity expansion. According to the Central Electricity Authority, the sector is expected to attract USD 110 billion in investments between FY22 and FY32.

Globally, major regions are also investing significantly in transmission infrastructure. Europe is focused on integrating renewable energy into its grids, North America is prioritising grid modernisation, and MENA (Middle East and North Africa) is addressing rising demand alongside a shift toward sustainable energy.

“To capitalise on these manifold opportunities, we favour product manufacturers with strong technological capabilities and a significant domestic manufacturing presence,” said the brokerage. 

In light of these growth opportunities, the brokerage has initiated coverage with a “buy” rating on three transmission stocks: CG Power and Industrial Solutions, GE Vernova T&D India, and Apar Industries.

GE Vernova T&D India: Upside 49%

Nomura has set a target price of ₹2,500 for GE Vernova T&D India, citing the company’s favourable positioning to leverage structural tailwinds in India’s transmission and distribution (T&D) sector. The price target indicates an upside rally of 49% from current levels.

The brokerage highlights five primary growth drivers: a substantial increase in Green Energy Corridor projects, with USD 9 billion in substation investments anticipated over the next 4-5 years; visibility on HVDC projects valued at USD 15 billion within the same period; grid digitalisation opportunities worth USD 4 billion over the next five years; integration of clean energy capacity, including 30 projects valued at USD 1 billion over three years; and a rise in orders from the metals, mining, and cement sectors.

CG Power and Industrial Solutions: Upside 33%

Nomura has set a target price of ₹970 for CG Power and Industrial Solutions, indicating a 33.24% upside from its recent close, with an anticipated earnings CAGR of 32% over FY24-27F. This growth projection is driven by the company’s strategic positioning across multiple business segments.

In the industrial systems segment, Nomura highlights that CG Power is well-positioned to benefit from increasing demand for energy-efficient motors, where it holds over a 35% market share in LT motors, as well as greater adoption of advanced drives.

The brokerage notes that CG Power will benefit from the growing demand for power equipment in the Power Systems segment due to the integration of renewable energy sources and improved power evacuation from thermal plants.

Nomura also expects the Railways division to capitalise on modernisation initiatives, with CG Power likely fulfilling 25-30% of orders. Additionally, growth in OSAT and motor sales to EV manufacturers, along with planned inorganic growth through a proposed QIP allocation of ₹13 billion, further supports its positive growth outlook for CG Power.

Apar Industries: Upside 25%

Nomura views Apar Industries as a promising proxy for India’s T&D expansion, assigning a target price of ₹11,700, indicating an upside gain of 25% from the stock’s latest closing price. Apar’s growth is expected to be led by its conductor business, which Nomura sees as benefiting from strong domestic demand for high-performance HTLS conductors and a growing export market for conventional conductors, resulting in a forecasted 16% revenue CAGR in this segment.

In the specialty oils division, particularly the transformer oil business, Nomura expects Apar to capitalise on India’s growing transformer demand, projecting a revenue CAGR of 13% for this segment.

Additionally, Nomura notes that Apar’s Cable Segment has gained significant traction, focusing on high-performance elastomeric and specialised cables. This growth is further supported by Apar’s recent entry into the B2C market with E-beam cables, a segment projected to grow at a 23% CAGR.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.