Buy Crompton Greaves Consumer Electricals; target of Rs 275: Dolat Capital
Dolat Capital’s research report on Crompton Greaves Consumer Electricals
The Q4FY19 results were in line with our estimates, as the inability to pass cost to customers led to a decline in the margins in the durables business. The performance in the lighting segment was better, both in value and volume terms. Margins in the lighting segment also improved, as the benefits of the cost reduction initiatives kicked in. In FY20, the ECD segment’s margins should also rise due to an improvement in the product mix while current margins in the LED segment should sustain. We marginally lower our sales/EBITDA/PAT estimates by 3%/4%/1%, respectively, in FY20E, and expect the company to report a sales/PAT CAGR of 15%/17%, respectively, over FY19-21E.
We view the company as a good adjunct between Havells and V-Guard, and maintain Buy, with an unchanged TP of Rs275, valuing the stock at 31x for FY21E.
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