Crompton Greaves Consumer Electricals Ltd. share price target

Primed to recover the fastest despite Q4 miss; upgrade to Buy Q4 numbers were a miss across our and consensus estimates, due to impact of March lockdown on sales, despite a strong Jan and Feb. However, margins were helped by lower costs, especially in ad expenses, which enabled CG Consumer to maintain 13.8% margins. At segmental levels, ECD margins were flat while lightning margins...

18 May 2020 CROMPTON was all set to witness one of its strongest quarter (based on Jan- Feb20 sales) before the onset of the COVID-19 led disruption in Mar20, which led the sales decline across categories in 4QFY20. While management is optimistic of supply side getting back to normal as the lockdown gradually eases, it still remains cautious on the demand outlook. Volume growth was robust during Jan-Feb20 (33% YoY across ECD and B2C Lighting). Primary sales have resumed from end-Apr20, and Fans and Pumps have seen good pick-up in the South and East India in May20. We have cut our FY21E/FY22E earnings estimates by 22%/11% to build in the impact caused by the COVID-19 disruption and modest demand outlook ahead. We maintain our Revenue declined 16% YoY to INR10.2b (16% below est.). EBITDA declined 18% YoY to INR1.4b (17% below est.) while EBITDA margin was down 40bp YoY to 13.6% (v/s est.

We cut Crompton's FY21/FY22 EPS by 16.7% and 8.4% given Covid-19 led disruption in demand. However, we believe Crompton is better placed than most of its peers given 1) low discretionary nature of products (fans, lighting and pumps.) 2) lesser dependence on seasonal products & 3) limited exposure to B2B segment. With demand uncertain, Crompton has implemented additional cost saving measures (Rs1bn) to rein in costs. However, to drive long term growth Crompton shall continue to invest in...

Crompton Greaves Consumer Electricals (CGCEL) reported a weak print in Q4FY20.

30 January 2020 Crompton demonstrated strong show in the ECD segment with market share gains across key categories. Management is optimistic on growth outlook and hasnt witnessed any meaningful slowdown in its core categories. Channel stocking in fans segment for upcoming summer season is key. We maintain our earnings estimates and Buy rating with TP of INR305. Cromptons 3QFY20 revenue grew 4% YoY to INR10.7b (in-line). EBITDA grew 8.6% YoY to INR1.4b and was 4% ahead of est. on the back of favorable mix, cost cutting initiatives and improvement in processes. Due to superior cash flow generation, other income came in at INR174m (v/s est. Adj. PAT grew 30% YoY to INR1.04b (in-line).

Crompton Greaves Consumer Electricals Ltd (CGCEL) reported weak Q3FY20 results (revenue/EBITDA down 3.6%/4.8% from our estimates)

For e.g. many companies are offering fans, yet the market concentration is quite high amongst the top 4-5 players. In Air Coolers, the growth rate is ~30%+ with again a clear path to rank among the top-3 players in 3 years. While its market share is quite low in many categories that come under Kitchen Appliances, CROMPTON believes that there is room for growth. The need is for meaningful distinctive offerings, (b) investment in marketing is required, the cost structure needs to be in place to enable the above two parameters without charging unusual premium, and have a GTM strategy to sell the product. Though LEDs have longer replacement cycle, demand is expected to be strong in the near term as new socket growth is quite robust, the replacement socket growth needs to be tapped and there is huge scope for premiumization in LED products compared to traditional lighting includes 3,500+ primary customers and 1,50,000 retail touch points.

Earnings miss estimates marginally: 2QFY20 revenue grew 4% YoY to INR10.7b (10% below est. INR11.9b), while EBITDA was up 4% YoY to INR1.3b (18% below est. INR1.6b). Reported EBITDA margin was marginally up 30bp YoY to 12% (lower than est. 13.2%). PBT came in at INR1.3b, up 9.5% YoY (15% lower than est. INR1.5b). Aided by lower tax rate of 12.3% (v/s 33.4% YoY), adj. PAT stood at INR1.1b (3.5% below est.). 1HFY20 revenue/EBITDA/PAT grew 8%/10%/29% YoY. Lighting segment performance disappoints: Lighting segment revenue...

Crompton Greaves Consumer Electricals Ltd (CGCEL) reported weak Q2FY20 results as continued disappointing performance of lighting segment.

We cut Crompton's FY20/FY21 EPS by 4.5%/3.4% given 1) slowdown in Change in Estimates | Target | Reco consumer discretionary spends impacting ECD growth rates and 2) near term profitability pressures in lighting due to ~15% price erosion in LED, delayed...