Buy Crompton Greaves; target Rs 135: Motilal Oswal

Motilal Oswal's research report on Crompton Greaves

• Improved traction in consumer business driven by new launches. Appliances stood out with revenue of INR2.1b (up 75 percent YoY).
• Standalone cash flow from operations (adj) at near all-time high. Project business curtailed at 17.5 percent of revenues (v/s 25 percent YoY).
• Transition phase has led to several moving aspects, which are challenging to monitor and stock's reaction to any slippages has been significant. In our view, Crompton Greaves' (CRG) performance would largely be driven by an improvement in overseas business, though a more stable standalone performance would protect downsides.

Valuation and view: "CRG's journey to emerge as a 'global corporation' from India continues to face multiple 'growth pangs'. Phase 1 of the restructuring program has been largely completed, with Hungary reporting positive EBIT margins in 4QFY13 and Belgium back in profitability in April 2013. The key 'monitorables' going forward are: losses in Canada, liquidated damages (important swing factor as globally PT factories are full for FY14), rework costs etc. Maintain Buy with a target price of Rs 135," says Motilal Oswal research eport. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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