Synopsis : India's engineering and capital goods sector is witnessing strong momentum driven by power transmission, renewable energy, semiconductors, and infrastructure investments. Nuvama remains bullish on CG Power and Thermax, citing multiple growth catalysts and improving business visibility.
Nuvama Picks CG Power and Thermax as Preferred Engineering Stocks
As India's infrastructure and manufacturing ecosystem continues to expand, brokerage firm Nuvama has identified CG Power and Thermax as its preferred investment picks within the engineering and capital goods sector.
According to the brokerage, both companies are well-positioned to benefit from long-term opportunities arising from India's energy transition, transmission infrastructure buildout, industrial investments, and export growth.
Why Nuvama Prefers CG Power
Nuvama believes CG Power offers multiple growth drivers that can support earnings growth over the coming years.
Key Growth Catalysts for CG Power:
- Expansion in Gas Insulated Switchgear (GIS) business
- Rising export opportunities
- Participation in India's semiconductor ecosystem
- Strong railway sector opportunities
- Beneficiary of power transmission investments
The brokerage expects these diverse growth engines to provide sustained momentum to the company's revenue and profitability.
Why Thermax Remains a Strong Bet
Thermax continues to be another preferred pick due to improving operational visibility and a healthier project mix.
Key Positives for Thermax:
- Legacy low-margin projects gradually reducing
- Improving order book quality
- Growing export opportunities
- Better earnings visibility
- Exposure to industrial and energy transition projects
Nuvama believes these factors could help improve margins and strengthen long-term growth prospects.
Power Transmission Emerges as a Structural Growth Theme
One of the strongest themes highlighted by Nuvama is the rapid growth in India's power transmission and distribution sector.
The brokerage noted that India aims to achieve nearly 900 GW of non-fossil fuel power capacity by FY36, which will require massive investments in transmission infrastructure.
Massive Investment Opportunity
According to Nuvama, transmission-related capital expenditure could reach approximately:
₹7.93 Trillion
This spending is expected to create significant opportunities for:
- Transformers manufacturers
- HVDC equipment suppliers
- GIS equipment producers
- EPC companies
- Grid infrastructure players
High Voltage T&D Companies Continue to Outperform
Nuvama highlighted that high-voltage transmission and distribution companies remain among the strongest performers within the engineering universe.
Sector Highlights:
- Order inflows increased around 52% YoY
- Revenue execution rose nearly 37% YoY
- Operating margins expanded to almost 20%
The brokerage attributes this strength to:
- Renewable energy-linked transmission projects
- Strong order books
- Favorable demand-supply dynamics
- Operating leverage benefits
Private Capex Recovery Still Developing
While order inflows remain healthy, actual project execution is yet to accelerate meaningfully.
Nuvama noted that private sector demand is gradually improving across sectors such as:
- Data Centres
- Semiconductors
- Electronics Manufacturing
- Electric Vehicles
- Metals
- Oil & Gas
However, margin pressures continue due to:
- Commodity inflation
- Higher logistics costs
- Currency fluctuations
Defence Sector Remains Promising
Nuvama also highlighted opportunities within India's defence manufacturing ecosystem.
Preferred Defence Picks:
- Bharat Electronics
- Solar Industries India
The brokerage believes strong order visibility exists, although some companies continue to face supply-chain and execution-related challenges.
Key Takeaway for Investors
Nuvama believes India's engineering sector remains one of the biggest beneficiaries of the country's infrastructure and energy transition story. While power transmission and distribution continue to lead growth, investors may need to remain selective as valuations have become demanding in certain segments.
Among its top engineering picks, CG Power stands out for its multiple growth levers, while Thermax offers improving profitability and execution visibility, making both companies attractive long-term opportunities according to the brokerage.
Disclaimer : This article is for informational and educational purposes only. The views and stock preferences mentioned are based on Nuvama's research report and should not be considered investment advice. Investors should consult a SEBI-registered financial advisor before making any investment decisions.
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