Buy Crompton Greaves; target of Rs 218: Maximus Securities

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Buy Crompton Greaves; target of Rs 218: Maximus Securities

Maximus Securities is bullish on Crompton Greaves and has recommended buy rating on the stock with a target of Rs 218 in its February 2, 2012 research report.

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Maximus Securities is bullish on Crompton Greaves and has recommended buy rating on the stock with a target of Rs 218 in its February 2, 2012 research report.

"Crompton Greaves reported consolidated net profit of Rs 77 crore for quarter ended December 2011 against Rs 233 crore in the same period a year ago. Net sales were at Rs 3,027 crore as compared to Rs 2,397 crore in the same period last fiscal. Despite having reported a growth of close to 26% in consolidated revenues during Q3 of FY12 YoY, the EBITDA margins of the company fell by more than 800 basis points during the period while net profit was lower by 67% in Q3 FY12 from the year-ago period. Execution of certain projects at near zero margins, in the power sector, crippled the operating margins of Crompton Greaves"

"Current period includes results of the subsidiaries acquired during the period specifically Emotron in Sweden and QEI in the USA. Consequently, figures for the current period are not comparable with the figures of the corresponding previous periods. The outlook in power system business continues to remain optimistic. More and more people are talking about renewable energy. Plus the ageing of power equipments in developed market provides good scope for CG, which already has strong manufacturing base. CG in fact won orders in Wind power systems and solar power systems during the Sep'11 quarter."
 
"CG will be able to sustain growth and margin on account of strong branding, new design, innovative products and penetration in urban & semi urban markets. Earnings will grow at a CAGR of approx 18% over FY11-13E. With this we come with a target price of Rs 218 (20x FY13E EPS)," says Maximus Securities research report.  

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