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Prabhudas Lilladher
Crompton
Greaves (Buy)
CMP: ₹216.85
Target: ₹290
Crompton Greaves Consumer Electrical (CG) continues to focus on innovation to differentiate across product segments. Strong growth potential in core categories and significant opportunity to improve reach/distribution offers multi-year growth visibility.
Go-to-market (GTM) strategy implementation is on track and focus is to improve quality and distribution reach using technology as the backbone. While the implementation of GTM strategy might create short-term disruptions, it will create a strong base for sustainable growth in future, as it is witnessing strong traction in regions where GTM is being implemented. GTM is expected to cover about 75 per cent of CG’s distribution in the next 12-18 months.
While the company has successfully executed the first leg of strategy of setting Fans/Lighting/Agro pumps on a strong growth footing, maintenance of the growth and successful scale up in other categories will be the key monitorable.
We expect sales to grow at a CAGR of 11.5 per cent and earnings CAGR of 18 per cent over FY17-20E. We maintain ‘buy’ with a target price of ₹290 (37xFY20).
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