ART OF INVESTING teaches us to take fundamental call, by which one can create wealth. But this philosophy has been destroyed by the hourly experts and media, have turned investors into traders (or read speculators), made them to buy a rising stock and sell the falling ones, based on so called Technical Call. Net outcome is either to make seldomely small profits (and not create wealth) or make losses in majority of the trades.
This philosophy has seen percolated hard, which we noticed many times and now with CG Power. CG hit Upper Circuit on last 4 days of Thursday, Friday, Monday and Tuesday, of 5% on each day, which prompted many as desperate buyer. Yesterday, it was seen freely available, as also hit LC at the end, but no one really saw keen to buy. We gave buy call on the stock at Rs. 15.50 on 19th August, 20, having already given a return of 260% in 6 months and still counting. Obvoiously, stock did not rise one way and saw profit booking as well in these 6 months. But we kept our bullish view intact, while advised buying, in case of share seen correcting. But many investors do not buy on a fall.
CG Power has present M Cap of Rs. 7,400 crores, while estimated to have an income of Rs. 5,000 crore in FY 23. Capital Goods companies, with Murugappa group as Promoter with 58% stake, make comparable peer to trade at an “EV to Income” of 3x to 5x. This can give an EV of Rs. 15,000 crore in the next 12 to 18 months to CG Power, even if we take lower multiple of 3x. As CG Power will not have Debt of over Rs. 400 crore, all the rise will flow into M Cap, which can rise to Rs. 14,500 crore from here.
This implies that CG Power has potential to almost double in the next 12-15 months and can kiss 3 digit mark.
One more observation- those holding it are seen fearful of share correcting and those who do not own it are sad and feeling dejected and depressed. So lesson tto all, respect and have conviction in your call, be honest with the stock and aim to make wealth and not profits.