Synopsis: A top brokerage highlights two industrial names with strong long-term growth potential amid a mixed engineering sector landscape, while flagging valuation risks elsewhere.
India’s engineering and capital goods sector is going through a phase of selective growth. Power transmission companies are riding a strong wave of orders and execution, but a full recovery in private sector capital expenditure is still taking shape. Against this backdrop, one brokerage has identified where the real opportunity lies.
Nuvama Picks CG Power and Thermax as Top Bets in Engineering Space
Brokerage firm Nuvama has released a sector review of India’s engineering and capital goods space, and its top picks are CG Power and Thermax. For CG Power, the brokerage sees multiple growth levers working at the same time. These include expansion in Gas Insulated Switchgear (GIS) equipment, a growing export order pipeline, semiconductor-linked investments, and railway-related business. The combination of these drivers gives the company a diversified earnings base that is not dependent on any single segment.
For Thermax, Nuvama sees improving business visibility as the primary trigger. The company has been working through a set of older, low-margin projects that weighed on its profitability in recent periods. As these legacy projects wind down, margins are expected to gradually improve. Growing exports add another layer of support to the order pipeline.
Power transmission leads the pack
Within the broader engineering universe, power transmission and distribution continues to be the strongest performing segment. Nuvama described it as “a key structural growth driver,” backed by India’s ambitious renewable energy expansion targets.
The Central Electricity Authority has outlined a target of nearly 900 gigawatts of non-fossil fuel power capacity by FY36. To support this, transmission infrastructure will need to scale significantly. Nuvama estimates that transmission capital expenditure could reach nearly Rs 7.93 trillion over the coming years.
This spending is expected to benefit companies involved in transformers, HVDC systems, GIS equipment and EPC contractors operating in the high-voltage space.
The numbers from recent quarters support this view. Order inflows for high-voltage transmission and distribution companies grew by nearly 52% year-on-year, while execution increased by around 37%. Operating margins for this group expanded to nearly 20%, supported by favourable demand-supply dynamics and operating leverage.
Valuations are a concern in some pockets
Despite strong fundamentals, Nuvama flagged that valuations in certain high-voltage T&D stocks have risen to levels where the risk-reward is no longer as attractive. While business visibility remains intact, the sharp re-rating in some names limits the upside for fresh investors.
Private capex recovery is slow but building
On the industrial engineering side, order inflows grew by nearly 36% year-on-year, but actual execution growth was far slower at around 10%. Demand enquiries are picking up across metals, oil and gas, data centres, semiconductors, electronics and electric vehicles, but the conversion into on-ground execution has been gradual. Higher freight costs, commodity inflation and currency pressures have also dented margins for several companies in this segment.
Defence shows steady but uneven progress
Nuvama sees varied performance within the defence segment. Bharat Electronics and Solar Industries India delivered stronger execution and remain the brokerage’s preferred names in this space. Some other companies in the defence basket continued to face supply chain disruptions and project delivery delays.
About CG Power and Industrial Solutions: CG Power and Industrial Solutions is a leading manufacturer of power and industrial systems in India. Its products include transformers, switchgear, motors and drives, serving utilities, railways, and industrial customers across domestic and international markets. In FY26, the company reported consolidated sales of Rs 12,418 crore, operating profit of Rs 1,625 crore at a 13% OPM, and net profit of Rs 1,199 crore, compared to sales of Rs 9,909 crore, operating profit of Rs 1,319 crore, and net profit of Rs 973 crore in FY25.
About Thermax: Thermax is a diversified engineering company offering solutions in energy, environment, and chemicals. It serves industries such as power, steel, cement, food, and pharmaceuticals, with a growing presence in exports and clean energy projects. In FY26, the company reported consolidated sales of Rs 10,694 crore, operating profit of Rs 1,026 crore at a 10% OPM, and net profit of Rs 720 crore, compared to sales of Rs 10,389 crore, operating profit of Rs 910 crore, and net profit of Rs 627 crore in FY25.
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