Prabhudas Lilladher's research report on Crompton Greaves Consumer Electricals
Crompton’s acquisition of controlling stake (upto 81%) in Butterfly – a leading Kitchen Appliances player will help accelerate its long-term strategic goal of becoming a leading player in the small domestic appliances segment. Leveraging its capability in driving efficiencies and GTM improvements, management expects to drive synergies across the business and expects the acquisition to be EPS neutral/ accretive in FY23/ FY24. We believe acquisition will be margin dilutive in FY23 as we bake in Rs10bn borrowings to fund the acquisition. However, broad based product portfolio and higher scale in Kitchen appliances business will provide decent returns over long term. CROMPTON continues to remain our preferred bet given 1) market share gains across core categories of Fans, Pumps & LED lights 2) sustained investments in LT initiatives (brand building, GTM, innovation, business processes & teams 3) well defined plan of entering & scaling up new categories (Water Heaters, Air Coolers, Mixer-Grinders) and 4) strong balance sheet (Dec21 net cash: Rs10.8bn).
We estimate 16.4% PAT CAGR over FY21-24 and assign a target price of Rs533 @ 42xDec23 EPS. We shall incorporate impact on our earnings upon consummation of transaction. Maintain BUY.
At 11:57 hrs Crompton Greaves Consumer Electrical was quoting at Rs 406.65, down Rs 1.75, or 0.43 percent.
It has touched an intraday high of Rs 418.85 and an intraday low of Rs 394.30.
It was trading with volumes of 117,514 shares, compared to its thirty day average of 49,910 shares, an increase of 135.45 percent.
In the previous trading session, the share closed up 7.87 percent or Rs 29.80 at Rs 408.40.
The share touched its 52-week high Rs 512.05 and 52-week low Rs 350.35 on 16 September, 2021 and 23 April, 2021, respectively.
Currently, it is trading 20.58 percent below its 52-week high and 16.07 percent above its 52-week low.
Market capitalisation stands at Rs 25,541.66 crore.
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