Citi upgrades Crompton Greaves, sees state margins at 8-9%

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26 Aug, 2025 12:21

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Moneycontrol Bureau Citi has upgraded Crompton Greaves to buy with an increased target of Rs 86 per share stating that the company may see a turnaround riding on renewed management focus on business. The brokerage firm also expects rebound in standalone power EBIT margins from historic lows of 5.1 percent in FY16 and likely balance sheet deleveraging from proceeds of sale of international T&D business.It has set earnings per share (EPS) of 23-65 percent over FY17-18 stating that there is nothing intrinsically wrong with the business. Citi is optimistic that steady state margins may be in the band of 8-9 percent in FY17 on better utilisation of facilities. "Given 15 percent sales decline in FY16, there should be no capacity constraints in FY17. Beyond that management is looking to selectively add capacity/debottleneck and increase outsourcing," it says in a report. It also feels that UDAY reform should be a trigger for growth even if it takes off in only a few states. Industrial business has recovered from the trough in FY16 with four successive quarters of annual sales growth. Citi sees its industrial recovery strengthening ahead with recovery in Indian Railways orders (after a temporary slowdown due to change in tendering process).

Meanwhile, Religare also has a buy rating with a target of Rs 80 on attractive valuations and cash flows. As its power sector is still struggling, Religare says a recovery could be expected in the switchgear segment from the low base of FY16 but transformer capacity utilisation is unlikely to improve meaningfully.

It also adds that Crompton's industrial business may continue to gain traction through FY17 driven by efficiency gains and partial recovery in certain sectors and closure of parts of international business likely to be completed by October this year.

The company's consolidated net loss reduced to Rs 102.17 crore for the March quarter. Meanwhile, HDFC Mutual Fund has trimmed its stake in Crompton by 2.01 percent to 7.20 percent by sales of shares worth 168 crore in the open market. Based on the weighted average price of Rs 132.65 per share, the deal is estimated to be worth Rs 167.89 crore.Posted by Nasrin Sultana