Buy Crompton Greaves Consumer Electricals; target of Rs 394: LKP Research

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26 Aug, 2025 12:21

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LKP Research's research report on Crompton Greaves Consumer Electricals

Crompton Consumer (Crompton) had a tepid quarter largely due to transition of Fans business to the new BEE norms impacting ECD segments (-7% YoY) while Appliances delivered growth with strong momentum. However, weakness was seen across lighting (-21% YoY) and pumps business. Overall revenues at ₹15.2bn grew 7.5% YoY. Despite lower scale and inflationary pressures, gross margins were relatively resilient and improved 90bps yoy/ 40bps qoq to 32.5%. But higher spends higher A&P, R&D, new business development and ₹160mn BEE transition cost) for future growth and additional support in the fans business led to a 424bps yoy/131bps qoq EBITDA margin decline to 10.1%. Management expects an improvement in margins with improvement in volumes. APAT stood at ₹843mn declined 43% YoY (BGAL PAT grew 29% YoY). Crompton continues to focus on product innovation (differentiated and premium products), GTM (improved reach) and branding (omni channel branding) as also on cost optimisation (Unnati program, better sourcing, etc) will reap benefits. We believe these initiatives will likely bode well with steady market share gains and margin improvement over the medium term. The acquisition of Butterfly Gandhimathi Appliances will increase synergies and enhance growth opportunities in Kitchen Appliances space.

Outlook

We have pruned down our estimates and target price accordingly given the 9MFY23 performance and remain positive on the upcoming summer season and improving operating performance along with recovery in B2C demand and shrinking unorganized market. Hence, we maintain our Buy stance with a revised PT of ₹394.

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Crompton Consumer - 06 -02 - 2023 - lkp