Crompton Greaves shares plunge on weak earnings show

Crompton Greaves

Shares of Crompton Greaves Consumer Electricals plunged on February 3 as the company's weak set of earnings for the December quarter dented investor sentiment.

The scrip traded 8.30 percent lower at Rs 304.75 on the National Stock Exchange at 09.48 am.  The decline in the stock was also accompanied by strong volumes that were higher than the 20-day daily traded average volumes.

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In the wake of weak sales from core segments like electrical consumer durables and lighting, revenues from Butterfly Gandhimathi Appliances, which the company had acquired last year helped support the 7.5 percent on year growth in its topline.

A sharp rise in employee costs and weak operating leverage weighed on the company's EBITDA margin which contracted sharply by 424 basis points on year to 10.1 percent in Oct-Dec. One basis is one-hundredth of a percentage point.

The weak operational performance also dragged the bottomline down 42.5 percent to Rs. 85.25 crore crore in the quarter ended December.

Even in the backdrop of a weak quarterly performance, investors will remain focused on the management's commentary on demand and margin outlook going ahead, especially at a time when rural demand continues to remain weak.

Brokerage view

Brokerage firm ICICIdirect believes CG Consumer's performance was adversely impacted by weak rural demand and dealer de-stockings in the December quarter.

The company also reported an EBIDTA margin which was much lower than pre-COVID levels, and we believe it is largely due to the lower operating
leverage of its lighting and Butterfly Gandhimathi verticals, the brokerage firm said in a note.

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