Dolat Capital is bullish on CG Consumer Electricals has recommended buy rating on the stock with a target price of Rs 260 in its research report dated May 18, 2020.
Dolat Capital's research report on CG Consumer Electricals
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 improved QoQ by 80bps showing a breather on price erosion in LEDs Given that Q1’20 is severely impacted due to lockdown, and recovery likely to be gradual, we trim our FY21E and FY22E estimates of sales/ EBIDTA/PAT by 26% / 34% / 34% and 22% / 26% / 26%, respectively.
Outlook
CG consumer is best primed for faster recovery within the FMEG space given its main portfolio of fans and lighting are low ticket, replacement items. Given recent price correction, we upgrade our rating to Buy with a TP of Rs 260, valuing the stock at 34xFY22E.
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