Prabhudas Lilladher's research report on Crompton Greaves Consumer Electricals
We cut Crompton's FY20/FY21 EPS by 4.5%/3.4% given 1) slowdown in consumer discretionary spends impacting ECD growth rates and 2) near term profitability pressures in lighting due to ~15% price erosion in LED, delayed execution in EESL orders and increased investments in B2B business. Although the near term outlook remains cautious, Crompton remains focused on creating new legs of growth in ECD. After successfully scaling up presence in segments like Geysers and Air Coolers, mixers and grinders have been identified as new areas of growth. Crompton will invest gains from higher gross margins in ECD to scale up new categories, increased go to market initiatives and growing B2B segment in lighting by building capabilities and technology. We remain positive on Crompton given 1) strong growth potential in core categories of fans, pumps 2) well defined plan to scale up new segments like Geysers, Air Coolers and now mixers and grinders 3) rising innovations and 4) increasing focus on brand building.
Outlook
We estimate 22% PAT CAGR over FY19-22 and value the stock at 30x Sept21 EPS of Rs10.1. Maintain BUY with a target price of Rs303
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