Buy Crompton Greaves Consumer Electricals, target price Rs 490: Emkay Global

Emkay Global has buy call on Crompton Greaves Consumer Electricals with a target price of Rs 490. The current market price of Crompton Greaves Consumer Electricals Ltd. is Rs 420.9. Time period given by analyst is one year when Crompton Greaves Consumer Electricals Ltd. price can reach defined target.

Crompton Greaves Consumer Electricals Ltd., incorporated in the year 2015, is a Mid Cap company (having a market cap of Rs 26503.26 Crore) operating in Consumer Durables sector.

Crompton Greaves Consumer Electricals Ltd. key Products/Revenue Segments include Electrical Consumer Durables, Lighting Products, Scrap, Sale of services and Export Incentives for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-12-2021, the company reported a Consolidated Total Income of Rs 1424.63 Crore, up 1.62 % from last quarter Total Income of Rs 1401.99 Crore and up 4.14 % from last year same quarter Total Income of Rs 1368.06 Crore. Company reported net profit after tax of Rs 148.26 Crore in latest quarter.


Investment Rationale
Crompton’s ECD revenue growth (ex-Pumps) of 11% yoy was healthy on a high base while Pumps revenue declined yoy due to industry-wide demand moderation. The company continues to focus on increasing its market share through distribution expansion and new product launches. It has opened an R&D center in Mumbai with a 150-member team. Within appliances, mixer grinder is a focus area, along with other small domestic appliances. High channel inventory and weak demand are key factors for near-term growth. In the Lighting segment, the impact of the decline in conventional lighting should fade away within 2-3 quarters, and new product launches should drive overall revenue growth. Though Crompton’s market share in down-lighters is only 5% currently, it should increase in the future. The brokerages are estimating a FY20-24 revenue CAGR of 7% for Lighting vs. 13% for ECD. As new category expansion is critical for the company to sustain its industry-leading revenue growth, continued delays in it would continue to have an impact on valuations. Key risks: demand moderation due to continued price hikes, market share losses, slow execution of new product launches, supply-chain disruptions, and sustained commodity price inflation

Promoter/FII Holdings
Promoters held 5.99 per cent stake in the company as of 31-Dec-2021, while FIIs owned 50.52 per cent, DIIs 32.82 per cent.