PremiumThe fans business continued to gain market share, while the appliances business posted industry-leading growth, driven by strong performance in water heaters, air coolers and kitchen appliances
Continuing its strong show, Crompton Greaves Consumer Electricals Ltd posted an impressive performance in Q4FY21. Revenues for the quarter rose 48% year-on-year to ₹1,522 crore, ahead of analysts’ expectations. Growth was strong across product segments and distribution channels, the company said.
The fans business continued to gain market share, while the appliances business posted industry-leading growth, driven by strong performance in water heaters, air coolers and kitchen appliances. Notably, the lighting segment that has seen high competitive intensity in the past, is also rebounding. Volume growth in the B2C lighting segment stood at 23% y-o-y during Q4.
Further helped by cost-optimization efforts, Ebitda also improved 62.4% y-o-y. Adjusted net profit growth was also impressive at 70.2%.
Analysts at Motilal Oswal Financial Services Ltd (MOFSL) said Crompton has consolidated its position in the fans and pumps segments, and has become the No. 2 player in the water heater segment.
The company’s two-year revenue CAGR stood at 12% in Q4, better than the 10% growth reported by Havells India Ltd, MOFSL analysts said.
The company continues to benefit from rising penetration through concentrated efforts on expanding distribution channel and rural reach.
There are near-term challenges though, owing to the spread of the pandemic. Also, rising commodity prices are expected to put pressure on profitability.
Analysts at Emkay Global Financial Services Ltd said, “Currently, channel inventory for fans is higher than last year. A gradual recovery in revenue is expected from Q2, similar to that of last year. Margins should remain impacted for 1-2 quarters due to commodity headwinds and the lag in implementing price increases."
With some disruptions expected in the near term, a sales rebound is expected to be led by the low discretionary nature of the electricals and appliances business of Crompton. This product range faces lower volatility and the rebound will also be faster compared to larger appliances, say analysts.
Work from home, higher demand for premium appliances and market share gains from unorganized players are also expected to benefit the firm.
Analysts at Prabhudas Lilladher Pvt. Ltd also have a positive rating on Crompton, given its sustained market share gains across the core categories of fans, pumps and LED lights.
They anticipate a 16.2% profit CAGR over FY21-23. Benefits are expected to accrue from the company’s well-defined plan of entering and scaling up new categories such as water heaters, air coolers and mixer grinders, according to the analysts.
The stock has risen 3% post results and trades at 41 times FY22 earnings estimates. It is, however, at a discount to Havells, which trades at more than 50 times FY22 estimates.
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