Murugappa Group’s CG Power: After a 2,700% Surge in Five Years, More Upside Ahead, Says Morgan Stanley

Morgan Stanley initiates coverage on Murugappa Group’s CG Power with an “overweight” rating and price targets of ₹799 (base case) and ₹1,044 (bull case), citing strong growth prospects in power systems, railways, and semiconductors.

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Introduction

In India’s fast-evolving industrial landscape, few stories match the meteoric rise of Murugappa Group’s CG Power and Industrial Solutions Ltd. The stock has delivered staggering returns of over 2,700% in just five years, transforming into one of the market’s most extraordinary comeback tales. Once marred by corporate governance issues, CG Power has reinvented itself under the stewardship of the Murugappa Group, capitalizing on India’s manufacturing resurgence, energy transition, and digital infrastructure push.

Now, global brokerage Morgan Stanley has initiated coverage on the stock, calling it a long-term growth story with multiple triggers. With a base-case target price of ₹799 and a bull-case scenario of ₹1,044, the firm sees potential upside of 15–50% from current levels, further fueling investor optimism.

This blog dives deep into CG Power’s transformation, its growth engines, risks ahead, and what Morgan Stanley’s analysis reveals about its future trajectory.

From Crisis to Comeback: CG Power’s Journey

A Troubled Past

Back in 2019, CG Power was in the news for all the wrong reasons. Fraudulent transactions, weak governance, and a collapsing balance sheet had nearly pushed the company into oblivion. Investor confidence was shattered, and the stock fell to rock-bottom levels.

The Murugappa Group Intervention

The tide turned when the Murugappa Group, one of India’s most respected conglomerates with interests spanning engineering, finance, and agriculture, took over the reins. The group’s credibility, prudent financial management, and focus on restructuring gave CG Power a new lease of life.

Within a few years, the company repaired its balance sheet, cut down debt, and realigned its operations with high-growth industrial sectors like:

Transformers and switchgear for India’s power expansion.
Motors division, where CG Power enjoys a dominant franchise.
Railway electrification and rolling stock components, tapping into India’s infrastructure boom.
Semiconductor assembly and testing (OSAT), one of the most ambitious and futuristic bets.

Why Morgan Stanley is Bullish on CG Power

Morgan Stanley’s optimism stems from three strategic pillars that CG Power is building upon:

1. Key Exposure to Manufacturing Growth

India’s push to raise manufacturing’s share of GDP from 16–17% to 25% by 2030 is a massive opportunity. CG Power’s motors division and power systems are deeply entrenched in this ecosystem, enabling capacity-led growth.

Dominant market share in motors ensures a steady revenue stream.
The transformers business is poised to benefit from rising investments in renewable energy, power transmission, and industrial electrification.

2. Expanding into Railways

The Indian Railways is undergoing an unprecedented transformation. With electrification targets, modern signaling systems, and expansion of metro and freight corridors, CG Power’s railway products portfolio is well-positioned to ride this wave.

3. Semiconductor Ambitions

CG Power’s most exciting initiative is its entry into semiconductor assembly and testing. Recently, the company’s subsidiary launched a facility in Gujarat, aligning with India’s ambition to become a global semiconductor hub. If execution succeeds, this could be a game-changer and provide multi-decade growth visibility.

Earnings Outlook: CAGR of 30% Through FY25–28

Morgan Stanley projects CG Power’s earnings to grow at a CAGR of 30% between FY25 and FY28. This growth will be powered by:

Capacity expansion across transformers, motors, and railways.
Government-led infrastructure demand, particularly in power and transportation.
New growth engines like OSAT and renewable-linked manufacturing.

By FY28, the brokerage expects the EBIT contribution of power systems to increase to 57% from 48% today, cementing it as the company’s most significant profit driver.

Price Targets: Base Case vs. Bull Case

Base Case (₹799): A 15% upside from current levels, factoring in steady demand in power systems and successful railway execution.
Bull Case (₹1,044): A 50% upside, assuming successful execution in semiconductors and strong traction across segments.
Bear Case (Not disclosed): Likely reflects risks such as pricing pressure in motors, delays in railways, or failure in OSAT execution.

Key Risks Highlighted by Morgan Stanley

While the outlook is bright, risks remain:

Intensifying Competition in Transformers: Pricing wars could erode margins.
Motors Segment Weakness: Demand volatility in industrial motors could weigh on growth.
Railway Delays: Execution bottlenecks or slow order inflows could dampen railway contribution.
OSAT Execution Risk: Semiconductor assembly requires high precision, capital intensity, and strong client relationships. Any misstep could derail this vertical.

Analyst Sentiment on CG Power

Out of 13 analysts covering the stock:
- 10 rate it as a “buy.”
- 3 recommend a “sell.”

This indicates a predominantly bullish stance, reflecting confidence in the Murugappa Group’s execution capabilities and India’s favorable macro tailwinds.

Stock Performance Snapshot

Current Price (as of Aug 29, 2025): ₹694
5-Year Gain: Over 2,700%
Friday’s Move (Aug 29): Up 5% after Gujarat OSAT facility launch.

The numbers speak for themselves. Investors who believed in the turnaround story have been richly rewarded, and institutions like Morgan Stanley now see further room to grow.

1. Fundamentals (as of Q1 FY2025–26)

Metric	Value / Trend	Interpretation
Market Cap	~₹1,05,000 crore	Large-cap industrial player with high investor confidence
Revenue (TTM)	~₹9,800 crore	Strong topline growth with new capacity additions
Net Profit (TTM)	~₹1,250 crore	Profitability improving under Murugappa stewardship
Earnings Per Share (EPS)	₹7.5	Healthy and rising EPS
Price-to-Earnings (P/E)	~92x	High valuation, reflecting growth expectations
Debt-to-Equity	0.08	Very low leverage, balance sheet de-risked
Return on Equity (ROE)	24%	Strong capital efficiency
5-Year CAGR (Revenue)	~22%	Impressive growth trajectory
Order Book	~₹17,500 crore	Visibility for next 2–3 years
Dividend Yield	0.2%	Token dividend, company reinvesting in growth

2. Technicals (as of Aug 29, 2025)

Indicator	Reading / Value	Technical View
CMP (Current Market Price)	₹694	Trading just below the resistance zone
52-Week High / Low	₹735 / ₹320	Strong uptrend, stock near lifetime highs
200-Day Moving Average (DMA)	₹550	Price is comfortably above long-term support
50-Day Moving Average (DMA)	₹670	Bullish crossover intact
Relative Strength Index (RSI)	63	Slightly overbought but within bullish zone
MACD	Positive crossover	The momentum indicator supports an uptrend
Volume Trend	Rising on up days	Institutional buying visible
Support Levels	₹650 / ₹600	Key downside protection zones
Resistance Levels	₹720 / ₹799 (Morgan Stanley target)	Breakout could open room to ₹1,044

📊 Interpretation:
Fundamentally, CG Power is sound: low debt, high ROE, and a solid order book. Valuations are expensive, but that reflects strong future growth bets (especially semiconductors).
Technically, the stock is in a clear uptrend, trading above key moving averages, with RSI still not in the extreme zone. Any breakout above ₹720 could trigger a rally towards Morgan Stanley’s base target of ₹799, and possibly the bull case of ₹1,044.

What This Means for Investors

CG Power today stands at the intersection of India’s energy transition, manufacturing resurgence, and digital revolution. Its established businesses offer stability, while new initiatives like semiconductors promise exponential growth.

However, investors must weigh the risks carefully. Execution challenges in high-tech businesses like OSAT or pricing pressures in motors and transformers could pose hurdles. Long-term investors with moderate risk appetite may find CG Power an attractive play, especially given the Murugappa Group’s reputation for disciplined growth.

Author’s Note

This article is intended exclusively for educational and informational uses. The analysis shared here is based on publicly accessible information and research findings from brokerage firms. It is recommended that readers consult with certified financial advisors before engaging in any investment choices. The author has no personal interest in CG Power.
Sources

Morgan Stanley Equity Research Coverage (September 2025)
Exchange filings and company announcements
Analyst consensus data

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