Motilal Oswal neutral on Crompton Greaves

Motilal Oswal has maintained neutral rating on Crompton Greaves with a target of Rs 127, in its May 28, 2012 research report.

“CRG reported disappointing performance for 4QFY12. Consolidated revenue grew 5.8% YoY to INR31b (below our estimate of INR32b). EBITDA margin declined 590bp YoY to 6.9% (below our estimate of 9.4%). Net profit declined 65% YoY to INR1b (lower than our estimate of INR1.9b). International business performance was poor, impacted by revenue deferments (down 5.9% YoY in EUR terms; down 11-13% adjusting for Emotron acquisition) and margin pressures. Standalone Power (EBIT margin: 9.6%) and Industrial segments (EBIT margin: 13.2%) reported the lowest EBIT margins since FY06, indicating continued pricing pressure. Industrial segment's sales declined 2.2%, given the capex slowdown.”

“Order intake grew 12% YoY in 4QFY12 and 15% in FY12 (Power: up 17%; Industry: up 4%), driven by strong order inflow from Power Grid. Order book stands at INR83b, up from INR71b as at the end of FY11 and INR81b as at the end of 3QFY12. For FY13, the management has guided 12-14% growth in consolidated revenue, EBITDA margin at 8-9% and 15% growth in order intake. Growth in Industrial business is expected to be supported by aggressive launch of drives in India by 2Q/3QFY13 and traction in railway projects. The Consumer segment growth would be supported by product portfolio expansion, given plans to source from China.”

“We have cut our EPS estimates by 15% for FY13 and by 6% for FY14 to account for lower profitability in both domestic and international businesses. The stock trades at a 38% discount to its long-term PE average. CRG is a strong company however, it is going through a tough phase, which is likely to impact reported performance in the medium term. We maintain Neutral,” says Motilal Oswal research report.  

Non-Institutions holding more than 90% in Indian cos

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