Buy Crompton Greaves CE; target of Rs 490: Emkay Global Financial

Trading Calls - Equity F&O

Emkay Global Financial is bullish on Crompton Greaves CE has recommended buy rating on the stock with a target price of Rs 490 in its research report dated January 25, 2021.

Broker Research

February 02, 2021 / 03:36 PM IST

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Emkay Global Financial’s report on Crompton Greaves CE

ECD revenues grew 32% yoy on market share gains in both Fans and Appliances, along with mix improvement and strong momentum in the rural channel. Standalone lighting revenues came in below expectations due to the continued weakness in the B2B segment. Despite muted standalone lighting revenues, EBIT margins saw an improvement (+127bps qoq and +476bps yoy). Even amid commodity inflation, gross margins remained stable, reflecting the benefits of better product mix and continued focus on cost optimization. Price hikes (5-8% effective Jan’21) in Q4, apart from above stated factors, shall help in partially mitigating impact of commodity inflation. Management remains confident on retaining recent market share gains and making further improvement.

Outlook

After the strong Q3 performance, we are raising FY21-23E EPS by 15-17%, driven by better revenue growth and margin profile. We maintain Buy with a revised TP of Rs490 (43x FY23E EPS vs. 35x earlier).

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