Shares of CG Power and Industrial Solutions were climbing on Tuesday as brokerages raised their expectations from the stock after the firm surprised with its margin growth in the quarter ended March.

What Happened: CG Power reported consolidated revenue of ₹2,190 crore for the quarter ended March, marking a 15% increase year-on-year, in line with estimates.

Gross margins expanded by 110 basis points year-on-year to 31.3%, attributed to a favorable product mix, pricing power and exports mix, according to Nuvama Institutional Equities.

Main drivers: The power segment experienced a revenue growth of 39% year-on-year, while the industrial arm saw around a 5% growth during the quarter.

The railway arm, which contributes around 15% to overall revenues, is projected to grow by 40% in the coming year, according to the company. CG Power anticipates doubling its existing scale in the power systems business solely from serving domestic demand.

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Experts anticipate that the power and railway segments will remain the company’s primary growth drivers, even as it expands its transmission and distribution capacities and railway offerings.

On the contrary, Nuvama retained its “buy” rating, raising the price target to ₹640 from ₹520, indicating an upside potential of around 17%.

During the quarter, CG Power obtained approval from the Union Cabinet to establish an Outsourced Semiconductor Assembly and Test (OSAT) facility in Sanand, Gujarat, with an estimated investment of around ₹7,600 crore. Funding will be sourced from government subsidies, equity contributions, and potential bank borrowings as needed.

Not Convinced: Kotak Institutional Equities maintained its “sell” rating on the firm but raised its target price to ₹400 per share, up from ₹370. The brokerage believes CG Power is unlikely to scale up exports in FY25; significant scaling is expected in FY26 after commissioning the new motor’s capacity.

Price Action: CG Power’s share price was up 4.09% at ₹568.6 in afternoon trade on Tuesday.

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