Crompton Greaves’ (CG) 1QFY17 results fell short of our estimates led by muted standalone Power margins (5.6%, -190bps QoQ) and higher un-allocable expenses (lower other income and costs related to sale of international power biz). Subsidiaries reported improved performance (PAT of Rs 18mn vs. loss of Rs 741mn YoY). However, this was led by the US power solutions business which will soon be sold.We remain constructive on CG’s prospects led by (a) Balance sheet deleveraging post the sale of its international Power business (b) Consequent simplification in corporate structure and better focus on the more lucrative domestic business and (c) Rising visibility on domestic transmission and Railways capex.

However, UDAY-led benefits are now expected to be long drawn. Also margin profile will remain lumpy given sale/windup of various businesses and related costs. CG’s recent run-up caps near term upsides. Downgrade to NEUTRAL with an unchanged SOTP-based TP of Rs 76/share (15x FY18E EPS for SA, 7x EV/e for subsidiaries).