Buy This Bluechip Consumer Electricals Stock For 20% Potential Upside: Top Brokerage

Stock To Buy: Target Price

The Current Market Price (CMP) of Crompton Greaves is Rs. 404.45. Ashika has estimated a Target Price for the stock at Rs. 485. This stock has the potential to give a 20.04% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 25,739 crore.

Stock Valuation

"Crompton is an undisputed market leader in fans and domestic pumps with healthy market share of ~28% and ~17%, respectively. We expect Crompton to post healthy earnings growth in the next couple of years. Hence, we recommend our investors to BUY the scrip with a target of Rs. 485 from 12-months investment perspective. At current market price, the scrip is valued at P/E multiple of 33.0x of FY24E Bloomberg consensus EPS of Rs. 12.5," the brokerage firm mentioned.

Strong Demand in Consumer Durables

According to CRISIL, revenue for the sector is expected to grow 15-18% to Rs.1 trillion in FY23, led by 10-13% volume growth. Demand is expected to be driven by both urban and rural market segments with the latter is expected to contribute meaningfully in 2HFY23. Besides, the festival season, which accounts for 35-40% of annual sales for consumer durables (barring air conditioners), is expected to remain upbeat. In FY22, the sector already crossed pre-pandemic levels in value terms.

Focus on Premiumization

Consumer preference is shifting towards smart, intelligent and connected products and Crompton has made significant efforts towards R&D. The company remains on firm ground with diversified product offerings, leadership in fan segment and encouraging growth in lighting segment apart from recent foray into kitchen appliances. The company enjoys 28%, 8% and 17% market share in fans, LED lightning and pumps, respectively with industry leading positions in all three segments. Moreover, the company generates >50% of revenue from new products.

Brand growth

In 1QFY23, fan business grew by 55% YoY, driven by 66% YoY growth in premium fans and 59% YoY growth in Table, Pedestal, Wall (TPW) fans. Even in lighting segment, while B2B sales remained muted, B2C segment grew by double-digit on the back of more innovative and differentiated products. In 1QFY23, lighting revenue grew by 61%, while B2C LED business grew by 82%.

Company Portfolio

Crompton Greaves Consumer Electricals Ltd. (Crompton) is the No.1 electrical consumer durables company with an 80+ year old brand and a pan-India footprint. The company derives 78% of its revenue from the electrical consumer durables business and the rest from the lighting business (22% of revenue). Besides, the company has a strong focus on R&D and distribution reach (with above 4,000 channel partners and above 1,50,000 retailers).

Disclaimer

The above stock was picked from the brokerage report of Ashika. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.