Buy Crompton Greaves CE; target of Rs 302: YES Securities

YES Securities' research report on Crompton Greaves CE

Our interaction with Crompton dealers/distributors hint at near-term growth issues for the company amid sluggish demand for Fans and Lighting. For Fans, lower-then expected demand in April & May caused higher-than-normal inventory. Dealers reckon inventory to be setteled by July end to mid-August. In case of Lighting, demand is muted and is expected to remain so in the near future. Dealers are pinning hopes on the festive season for a demand revival. Small appliances and new products like built-in large appliances are likely to deliver double-digit growth, albeit with low contribution to the overall revenue. Butterfly turnaround won’t be anytime soon, given low demand for kitchen appliances down trading in certain product categories. Margins would likely languish at lower levels given higher R&D and marketing/distribution costs, as also increased employee costs to stem recent attrition.

Outlook

We remain cautious and downgrade the stock to Neutral with PT of Rs302 as there is limited upside from current levels. We continue to value the stock at 27x FY25 EPS and believe an opportunity to enter the stock is likely at lower levels.

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