Emkay Global Financial is bullish on Crompton Greaves has recommended buy rating on the stock with a target price of Rs 271 in its research report dated July 27, 2020.
Emkay Global Financial's report on Crompton Greaves
Better-than-expected recovery in June led to a 12% beat over consensus revenue estimates. June saw strong recovery in Fans, Pumps, Appliances and the Consumer Lighting segment. Crompton continued to gain market share in Fans and B2C lighting. Efficiency improvement and increased efforts in driving cost-optimization programs offset adverse operating leverage and restricted EBITDA margin decline. Gross margin improved 88bps qoq, while it remained stable yoy. Strict working capital control helped cash generation in Q1. As per management, demand in July’20 is trending well, showing improvement mom, although the B2B segment remains under pressure. Intermittent lockdowns pose a threat to sustained demand recovery.
Market share gains and stable margins despite a sharp decline in revenue are key positives. The strong beat in Q1 numbers makes us raise FY21E EPS by 10.6%. Maintain Buy with a revised TP of Rs271 (32x Sept’22E EPS). We are OW on Crompton in EAP.
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