Prabhudas Lilladher is bullish on Crompton Greaves Consumer Electricals has recommended buy rating on the stock with a target price of Rs 308 in its research report dated September 28, 2020.
Prabhudas Lilladher's research report on Crompton Greaves Consumer Electricals
We reiterate our positive stance on CROMPTON given its strategy of investing in long term strategic initiatives like 1) distribution & GTM initiatives 2) Creating new legs of growth in large durable categories and 3) sustained product innovations to consolidate its position in Fans, Lighting and Pumps. CROMPTON is creating & scaling up new legs of growth in Geysers, Air Coolers and now with Mixer-Grinders (Rs65bn category). We believe margins in lighting have bottomed out (declined 540bps to 6.1% in FY20) as price stability will enable 240bps margin expansion (8.5%) and 63% growth in EBIT over FY20-23 with a scope to still surprise positively. We believe CROMPTON is better placed than peers given 1) low discretionary nature of products (fans, lighting, mixer-grinder, pumps) 2) sustained growth potential in core categories of fans & pumps 3) Well defined plan to scale up new segments like Geysers, Air Coolers & Mixer-Grinders and 4) strong balance sheet (FY23 Net cash of Rs21.1/share, ROE of 25.9% and ROCE of 32.8% and FCF/Adj PAT of 88%).
Although we expect Havells to command premium given higher scale and product range, expect valuation gap to narrow overtime. We estimate 13.8% PAT CAGR over FY20-23 and assign a target of Rs308 at 30xFY23 EPS (Rs288/-@30x Sept22 EPS earlier). BUY.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.