Buy Crompton Greaves Consumer Electricals; target of Rs 369: Prabhudas Lilladher

Prabhudas Lilladher's research report on Crompton Greaves Consumer Electricals

CROMTON’s management hosted an analyst meet to discuss Crompton 2.0. The company’s growth strategy at healthy margins remains intact as it 1) restructured organization with five business units, 2) appointed second level leadership team (incl. business unit leaders + functional heads), 3) setup innovation center to continuously increase SKUs across BUs, 4) diversified GTM channels (enabled by technology) by leveraging new channels (ecom, modern retails) & building future ready channels (D2C, export) and 5) increased focus on A&P. Although the strategy may impact FY24 financials, we expect better growth FY25 onwards as highlighted in our Jun-23 visit update (link).

Outlook

Management expects 7-10% revenue growth in existing business and <30% in new vertical of large appliance business. 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 Rs369 @ 35x FY25 EPS, 10% discount to avg PE (Rs338 earlier). Maintain ‘BUY’.

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