Buy This Mid-Cap Consumer Electricals Sector Stock, Shares Can Surge 29%, Says Yes Securities

Leading brokerage firm Yes Securities in its recently published report maintains a "buy" call on Crompton Greaves Consumer Electricals Limited with a target price of Rs 465 per share. If the stock is purchased at the current market price, it could lead to potential gains of 29% considering the target price.

Crompton is a leading player in India's consumer durables sector in electronics products with a wide portfolio, which includes pumps, fans, lighting, and household appliances. It is a mid-cap company with a market cap of Rs 23,031.78 crore.

Stock Outlook & Returns on Investment

The current market price (CMP) of the stock is Rs 362.20 per share. The stock today has fallen 0.0.3% ending at the CMP. Its 52-week low level was recorded in June 2022 at Rs 312 and its 52-week high at Rs 493.20 in November 2021.

In terms of returns on investments, the stock over the year has declined, giving 25.79% negative returns. It has given 4.15% negative return in 1 week, 12.07% in 1 month and 9.21% in 3 months, respectively. However, it has given positive returns in long-term investments. In 3 years it has given 43.11% and in 5 years 67.3% positive returns to shareholders.

Result Highlights

Quarter Summary - CROMPTON saw revenue decline of 4% yoy on standalone basis with its core category ECD and lighting declining at 3.1% and 6.6% respectively. Butterfly revenue on other hand has declined 9% yoy on high base and absence of pent‐up demand. 

Margins - Margins were lower than estimates on negative operating leverage and higher investments in products and brand building. Company continues to invest in developing alternate channels, R&D center and brand building and development. 

Market share performance - Crompton has marginally managed to gain market share in Fans on rolling 12 months basis. On the premium fans side company's market share has increased 5% in similar period.

New product category ‐ Crompton foray into built‐in kitchen appliances has met with strong positive response from the channel and customer. The response on new products were better than company's own expectation. CROMPTON will continue to focus on top 10 cities for this new product category.

Result Synopsis - Brokerage's views

Crompton has reported marginally lower than expected revenue with ECD and Lighting segment declining 3% and 7% respectively. Decline in ECD was on back of high base subdued demand environment for Fans which were marred by high inflationary environment and de‐stocking by channel as it is moving towards BEE ratings. Gross margins at 32% have come back to its normalized levels, while operating margins were lower as company continues to invest in its long‐term strategic initiatives like R&D innovation center, increased A&P spends and investing in alternate channels. On Butterfly front company transition is happening smoothly and now company is confident of double‐ digit EBITDA margins to be base which can be improved upon. CROMPTON continues to gain market share in key categories like Fans. CROMPTON entry into built‐in kitchen appliances has met with positive response which has been ahead of expectation. We continue to remain positive on the stock and maintain BUY as consolidation of Butterfly, entry into built‐in appliances and investments in alternate channels along with strong impetus on R&D will lead CROMPTON to maintain its industry leading growth.

Brokerage maintains buy call with a target price of Rs 465/share

"We expect industry-leading growth momentum to continue for CROMPTON with significant opportunity to improve on BGAL's performance and entry into built‐in kitchen appliances We however have trimmed our margin estimates on higher investments on account of developing new business and brand building for BGAL. We now build in FY22‐24E Revenue/EBITDA/PAT CAGR of 23%/19%/11% and arrive at our PT of Rs 465 valuing the company at 42x FY24EPS and maintain our BUY rating," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Yes Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.