HDFC Securities' research report on Crompton Consumer
Crompton’s Q4FY23 print surprised positively, largely on account of a decent ECD performance in a challenging environment. ECD revenue grew by 8% YoY (Havells/Orient dipped 14/20% YoY). ECD growth was led by appliances (+43%) and pumps (+15%) while fans were flat (premium fans +24%; BLDC fans up 2.5x). While maintaining its fans' market share in the mass segment, Crompton has gained market share in premium fans (#2 in BLDC). Lighting remained weak due to subdued B2B performance. The company is focusing on fixing white spaces by taking various corrective steps like (1) higher brand investments; (2) innovation and R&D; (3) expanding GTM reach; (4) new brand architecture in pumps; and (5) dedicated sales team in lighting. Current valuation is low (ECD business is valued at <INR 140bn for EBIT of INR 8bn in FY23 vs. Havells’ implied ECD value of c.INR 200bn for EBIT of INR 4bn). If Crompton sustains a healthy trend for the ECD business, the valuation gap will narrow.
We maintain our estimates and value the stock at 35x on Mar‘25E EPS to derive a TP of INR 400. Maintain BUY.
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