Prabhudas Lilladher's research report on Crompton Greaves Consumer Electricals
Crompton 1Q growth was led by ECD segment (16% sales and 20.6% EBIT growth) mainly in Fans, Geysers and Air Coolers. However, lighting margins were impacted due to 1) higher ad spends on new launches (Cricket World Cup) 2) investment in building B2B capabilities & 3) higher provisioning due to delay in payment (on account of elections). We like the company strategy of 1) creating new legs of growth in ECD by scaling up presence in segments like Geysers and Air Coolers in order to achieve No2/3 slot in next 3 years and 2) Increasing presence in B2B segment in lighting where they have lost ground over the years. We retain our positive stance on Crompton given 1) success of new launches in emerging segments like Geysers and Air Coolers 2) rising innovations with products like Anti-Bac, Air Buddy, Aura Fluidic and Crest Mini in mature categories 3) deeper distribution reach (through GTM) 4) increasing focus on brand building and 5) gains from cost optimization program (Unnati).
Outlook
We estimate 20% PAT CAGR over FY19-21 and value the stock at 33x June 21 EPS of Rs9. Maintain BUY with a target price of Rs297 (earlier Rs284)
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