Crompton Greaves up over 4% on positive brokerage ratings

As part of its ‘Crompton 2.0’ strategy, the company will divide its business into strategic units, premiumise its product portfolio and enter switches, switchgears, wires and cables business

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Crompton Greaves Consumer Electricals extended gains for the third session on August 23 morning after recent investor meetings and the announcement of a new business strategy led to positive ratings from brokerage houses.

After a muted first quarter, the electronic consumer durables company unveiled the so-called Crompton 2.0 strategy to improve operational efficiency and product marketing.

The company will divide its business into strategic units to improve accountability and create separate on-ground sales teams for multiple products.

Its plan to premiumise its product portfolio and enter switches, switchgears, wires and cables business seems to have improved investor sentiment.

At 10.30 am, Crompton Greaves stock was quoting at Rs 311.65 on the National Stock Exchange, up 4.56 percent from the previous close.

Financials

Crompton Greaves Consumer Electricals reported only a percent growth year-on-year (YoY) growth in revenue at Rs 1,877 crore in the June quarter.

Earnings before interest, taxes, depreciation and ammortisation (EBITDA) declined 16 percent YoY to Rs 186 crore. The EBITDA margin was down 190 basis points at 9.9 percent. Profit after taxes (PAT) for the quarter under review declined 3 percent YoY to Rs 122 crore.

Segment-wise, the company reported a 6 percent YoY increase in its revenue from the electronic consumer durables business to Rs 1,429 crore. Revenue from the lighting segment declined 13 percent YoY to Rs 229 crore.

The revenue from Butterfly Gandhimathi Appliances saw 14 percent YoY drop at Rs 219 crore. The cookware and home appliances company is in the process of merger with Crompton Greaves Consumer Electricals.

Brokerage Ratings

ICICI Securities

ICICI has maintained a “buy” call rating on Crompton Greaves with the target price set at Rs 350. The brokerage expects revenue to rise at a CAGR of 7.5 percent and PAT at a CAGR of 15.8 percent until FY25 with FY23 as the base.

It is positive on the company following the adoption of “strategy 2.0” and the plans to launch new products.

The brokerage sees a strong potential in Butterfly Gandhimathi to aid Crompton’s business, considering that despite lower overall revenue, it generates Rs 300 crore from the e-commerce channel, higher than Rs 250 crore earned by Crompton.

CLSA

CLSA has upgraded the stock to a “buy”. Seeing an upside potential from the current price, the brokerage has set the target price at Rs 365, saying the company has identified crucial gaps in its portfolio. “Near-term earnings may look soft due to lower margin,” it said. The brokerage believes that the new restructured organisational team will enable the company to perform better in the long run.

Nomura

Nomura has a “neutral” rating on the stock with the target price at Rs 338. “The stock currently trades at 28.5x FY25 P/E, which we believe is in the fair value zone,” it said.

The brokerage expects new initiatives and industry consumption recovery to drive revenue CAGR over 10 percent till FY26.

Crompton Greaves manufactures consumer electrical products including fans, lighting solutions, pumps, and household appliances.

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