Crompton Greaves Consumer Electricals Ltd. share price target

Crompton Greaves Consumer Electricals (Crompton) has reported muted revenue growth of 4% to Rs10.8bn in 2QFY20. Revenue from ECD segment grew by 11% YoY to Rs7.9bn led by strong performance in fans, pumps and Geyser, while revenue from Lighting segment declined by 12% YoY to Rs2.9bn led by price erosion and lower EESL sales (down 60%). EBITDA margin was up 10bps YoY to 12.0% as higher margin in ECD segment was partially offset by lower margin in lighting segment. PAT grew by 44% YoY to Rs1.1bn aided by higher other income and lower tax rate. Further, the Company is in the process of revamping its ECD business, which is expected to be implemented by FY21E. We cut our revenue estimates by 2%/6% for FY20/21 factoring the...

Earnings miss estimates marginally: 1QFY20 revenue grew 12% YoY to INR13.5b (in line with our est. of INR13.7b), while EBITDA was up 15% YoY to INR1.9b (5% below our est. of INR2b). Reported EBITDA margin improved 30bp YoY to 14.2% (lower than our est. of 14.7%), while other income came in higher than our expectation at INR173m. Thus, adj. PAT at INR1.2b was 6% below our expectation of INR1.3b. Lighting segment performance disappoints: Lighting segment revenue declined 2% YoY to INR2.7b (our est. INR3b; +12% YoY). Revenue was...

Crompton's performance has witnessed volatility (vs. Havells) over the last 4-6 qtrs resulting in stock underperformance. Both segments (ECD and lighting) need to fire together for the stock to re-rate. Market share gains in fans, success in appliances, GTM benefits, cost savings program and acceleration in B-B lighting will be the key drivers. We expect sequential recovery in lighting margins hereon (stable GM and moderate increase in marketing spend). We model 20% EBITDA growth over the rest of FY20 (also driven by a favorable base of 4%) Cromptons 1Q performance was a mixed bag with beat in ECD while miss on lighting. Cos success in ECD with market share gains in fans and higher aggression in appliances was encouraging. Lighting disappoints with legacy issues (conventional lighting) and investments in B2B. We cut EPS by 2-3% over FY20-21E. We value co at 35x on Jun-21 EPS, arriving at a TP of Rs 304.

DART view: In line quarter; ECD grew strongly: Maintain Buy The Q1FY19 results were in line with our estimates. The ECD growth was strong, with seasonal impetus for fans and pumps. However, price erosion continued in the B2B lighting, falling 5-7% YoY. Although Crompton, is trying to offset it with premium products in B2C. Lighting margins contracted 631bps QoQ, on account of higher A&P; spend and accounting provisions, while EBIT margins for ECD expanded, due to better product mix. We maintain our Sales/EBITDA/PAT in FY20E, and expect the company...

Crompton Greaves Consumer Electricals Ltd (CGCEL) reported weak Q4FY19 results (Revenue/EBITDA down 5%/7% from our estimate).

Crompton has been focusing on building long term structural platform (distribution) rather than reaping low hanging fruits. Management is focusing on (1) Strengthening leadership in fans (NPD for wider price points, offering 5 year warranty vs. 1-2 year by peers), (2) Leveraging distribution (GTM benefits), (3) Brand leveraging via entering in newer categories and (4) Cost reduction and product mix to drive margins. We model 20% EPS CAGR over FY19P-21E. Maintain BUY. Cromptons 4Q performance was mixed with miss on ECD margins (challenging quarter) but beat in lighting margins (recovered with various initiatives). We expect FY20 performance to improve led by (1) Healthy growth for ECD (new launches), (2) Lighting sustaining healthy margins (200bps YoY expansion in FY20E) and (3) GTM benefits kicking-in. Stock was flat in FY19 due to lack of fireworks in their performance. We expect a re-rating in the stock in FY20 (led by outperformance vs. peers). We value at 35x on Mar-21 EPS, arriving at a TP of Rs 300.

Crompton Greaves Consumer Electricals Ltd (CGCEL) reported weak Q4FY19 results (Revenue/EBITDA down 5%/7% from our estimate)

Earnings in-line: 4QFY19 revenue grew 7% YoY to INR12b, while EBITDA was up 2.5% YoY to 1.7b. Reported EBITDA margin declined 60bp YoY to 14%, but adjusting for ESOP charges, EBITDA margin contracted 130bp YoY to 14.6%. Other income was higher than expectation at INR172m. Thus, adj. PAT came in at INR1.13b, in line with our expectation. For FY19, revenue growth stood...

We retain our positive stance and BUY rating on the stock given positive Change in Estimates | Target | Reco growth outlook and 20% PAT CAGR over FY19-21. The demand for ECD segment remains strong and there is no case for any structural slowdown,...

In line quarter; Better guidance for FY20; Maintain Buy The Q4FY19 results were in line with our estimates, as the inability to pass cost to customers led to a decline in the margins in the durables business. The performance in the lighting segment was better, both in value and volume terms. Margins in the lighting segment also improved, as the benefits of the cost reduction initiatives kicked in. In FY20, the ECD segment's margins should also rise due to an improvement in the product mix while current margins in the LED segment should sustain. We...