CG Power's Growth Strong Amid Valuation Concerns, Says Expert
CG Power's growth momentum strong, but valuation comfort missing: Sandip Sabharwal
Image: The Economic Times
Sandip Sabharwal highlights CG Power's recent capacity expansion as a sign of growth in the power equipment sector, but warns that soaring valuations may deter new investors. He notes that existing shareholders should hold their positions, while new investors should wait for corrections before entering the market.
- 01CG Power has inaugurated its S3 unit in Nashik, doubling switchgear production capacity from 9,000 to 18,000 units.
- 02Valuations for CG Power and similar companies have surged, with price-earnings ratios exceeding 100 times, making new investments risky.
- 03Sabharwal believes current stock prices reflect overly optimistic earnings growth assumptions, requiring 50-60% growth for the next decade to justify valuations.
- 04Wockhardt's recent approval of its antibiotic Zaynich has generated excitement, but Sabharwal cautions that immediate commercial opportunities may be overestimated.
- 05The aviation sector is facing challenges with route cuts due to high fuel costs, but stronger companies like InterGlobe Aviation are expected to emerge more resilient.
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CG Power's recent inauguration of its S3 unit in Nashik marks a significant expansion, doubling its switchgear production capacity from 9,000 to 18,000 units. This development underscores the company's growth potential in the power equipment sector. However, market expert Sandip Sabharwal warns that soaring valuations across the sector, particularly for CG Power and its peers like Hitachi Energy and GE Vernova, may discourage new investors. He points out that these companies are trading at price-earnings ratios exceeding 100 times, which suggests that current stock prices reflect overly optimistic growth projections. Sabharwal advises existing shareholders to maintain their positions but recommends that new investors wait for meaningful corrections before entering. In the pharmaceutical sector, Wockhardt's approval of its antibiotic candidate Zaynich has excited markets, but Sabharwal cautions against overestimating immediate commercial opportunities. Additionally, the aviation industry is experiencing route cuts due to high fuel costs, although stronger players like InterGlobe Aviation are likely to benefit in the long run due to their robust financial positions.
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Investors in the power equipment sector may need to reassess their strategies due to high valuations, while existing shareholders of CG Power can maintain their investments.
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