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Reliance Securities
Crompton Greaves (Buy)
CMP: ₹228.25
Target: ₹305
Crompton Greaves Consumer Electricals (CGCEL) likely to report a decent PAT growth by 19.3 per cent y-o-y to ₹100 crore in 4QFY18 while EBITDA margin seen improvement by 60 bps to 13.8 per cent led by improved margin in electrical consumer durable and lighting products business.
CGCEL’s consumer business — which enjoys a substantial brand presence and goodwill in India — is expected sustain growth, going forward on the back of strong demand and higher outsourcing.
The light electrical industry is poised for strong double-digit growthahead and CGEL is well positioned with a strong presence across fans, lighting, pumps and appliances.
We expect CGCEL’s business to recover in next 1-2 quarters, as normalcy is steadily getting restored post GST roll-out. We expect the company’s revenue and earnings to witness 17.4 per cent and 23.3 per cent CAGR, respectively over FY17-20E driven by strong product portfolio of established brands, market leadership and strong distribution network. CGCEL is expected deliver RoCE in the range of 35-40 per cent during the same period.
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