CLSA maintains buy rating on Crompton Greaves

MUMBAI: CLSA has reiterated its buy rating on Crompton Greaves Consumer Electricals. It said the company’s maiden annual report highlighted a five dimensional strategy to drive long-term revenue growth.

The brokerage said that the company had identified premium fans and agro pumps as key growth areas as it believed that the government’s increased focus on irrigation is likely to have a positive impact on demand for agricultural pumps. It said the company sees rise in rural penetration, increasing electrification, replacement demand and shift towards premium products as key demand drivers for fans.

CLSA said the company’s creditor days at about 67 days are high compared with its peers. It said it continued to believe that a shorter credit cycle could help it to negotiate better terms with its vendors. It said this would offset investor concerns that acceleration in branding and promotion expenses coupled with channel push may hurt near-term margins.

It added that company has set itself a target to be the fastest-growing company in the sector with an aim to create ‘disproportionate’ returns for the stakeholders. CLSA pegged P/E at 26.1x FY2017 and 21.6x FY2018 estimated earnings. Crompton Greaves Consumer Electricals rose 1.14% to Rs. 163.55 on Friday.