Buy Crompton Greaves Consumer Electricals; target of Rs 406: Prabhudas Lilladher

Prabhudas Lilladher's research report on Crompton Greaves Consumer Electricals

We downward revise our FY23/FY24/FY25 earnings by 8.0%/3.0%/2.9%, to factors in weak performance and weak demand scenario across segments, due to high retail inflation & price vitality. In Q3 Crompton Greaves Consumer Electricals (CROMPTON)’s Butterfly business (up 1% YoY) was impacted, mainly due to muted growth in mixer grinders category (contributes 28-29% sales) and increased GST rate from 5% to 18% in wet grinder (11-12% sales). Crompton lagged in pushing non-rated fans inventory to the channel, which thereby impacted sales. The company, however, believes that fans business transitioned smoothly to the new BEE norms and focus will be to further improve cost structure with scale.

Outlook

Going forward incremental growth will come from kitchen appliance business of Crompton & Butterfly, lighting business and large appliance business, in our view. We estimate Sales/EBITDA/Adj. PAT CAGR of 16.1%/14.9%/9.8% over FY22-25E and maintain ‘BUY’ rating with revised TP of Rs406 (Rs435 earlier) @ 35x FY25 EPS.