Buy Crompton Greaves Consumer Electricals; target of Rs 338: Prabhudas Lilladher

Buy

Prabhudas Lilladher's research report on Crompton Greaves Consumer Electricals

We met CROMTON’s management to gauge how demand, competitive scenario and change in strategy is shaping overall business. Crompton has taken corrective measures like 1) restructured the business in five verticals, 2) hired/appointed second level management team, 3) addressed the frontend sales team attrition, and 4) increased focus on A&P and R&D for driving growth. Although the strategy might impact FY24 financials, we expect better growth from FY25 onwards. Over FY17-23 Company’s Revenue/EDITDA/PAT CAGR stood at 9.9%/8%/8.7% while excluding Butterfly Revenue/EDITDA CAGR was at 6.4%/5.7%. Management expects 7-10% revenue growth in existing business and <30% in new vertical of large appliance business.

Outlook

Further, EBITDA margin is expected to be in 10-12% range over coming years. We estimate Sales/EBITDA/PAT CAGR of 12.0%/14.0%/21.6% over FY23-25E and revise our TP to Rs338 @ 32x FY25 EPS (Rs371 earlier). Maintain ‘BUY’.

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Crompton Greaves Consumer - 16 -06 - 2023 - prabhu