Buy Crompton Greaves Cons. Electricals ; target of Rs 242: YES Securities

YES Securities' research report on Crompton Greaves Cons. Electricals

Revenue de-growth was largely on account of lower volume offtake in March. Jan-Feb growth across products segment was strong 14% yoy led by 18% in ECD. Fans continued to gain market share and witnessed 20% growth during Jan & Feb. New products categories like water heaters, air coolers and mixer grinder too registered robust growth. Lighting segment rev de-grew 16.7% yoy in Q4 largely due to weak B2B segment performance and revenue loss in March. Volume gr (Ex-EESL) in Jan-Feb was up 35% yoy. Crompton could maintain margins on a yoy basis at 13.8% led by cost reduction initiatives since past few quarters, lower incentive payouts and curtailment of A&P. ECD EBITM was higher by 51bps to 20% in Q4. Lighting EBITM was at 7.7%, down 380bps yoy, however it improved on a sequential basis. Inventory buildup in March led to an increase in capital employed in both the businesses. Other income dip of 29.5% yoy was a negative surprise.

Outlook

We value the company at 32x FY22E P/E and arrive at a revised target price of Rs242, while maintaining our Buy rating on the stock.

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