Crompton Greaves Consumer Electrical (CGCEL) reported a strong all round performance with topline, PBT growth of ~26%, ~46%, respectively, in Q3FY21. The strong topline growth was contributed by electrical consumer durable (ECD) segment (75% of topline) wherein revenue growth came in at 32% YoY, much ahead of our growth expectation of 16% YoY. The company's strong distribution network in semi urban/rural India has helped it to gain market share from unorganised players, which were largely impacted by various supply related issues. According to the management, the current market share gain is likely to sustain in future due to the company's aggressive go to market (GTM) strategy and continuous launch of new products. On the lighting front (~25% of revenue) while B2C category of products registered strong volume growth of 13% in Q3FY21, the institutional business (that is 50% of lighting revenues) remains weak due to slow offtake by institutional clients. On the costs front, the continuous focus on its cost optimisation measure helped the company to save ~Rs. 40 crore of operating costs in Q3FY21. The company has also taken price hikes (in the range of 5-8%) from the start of January 2021, to offset rising input costs. We believe the company's various cost optimisation measures along with price hikes to offset higher input price would help it to maintain its operating margins at an elevated level, going forward.
Valuation & Outlook
CGCEL's revenue, earnings are likely to grow at CAGR of 13.5%, 15%, respectively, in FY20-23E supported by elevated margins and saving in interest outgo. We maintain our BUY rating on the stock with a revised target price of Rs. 480 (earlier TP of Rs. 440) valuing at 40x FY23E earnings.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_CromptonGreavesCons_Q3FY21.pdf
Shares of Crompton Greaves Consumer Electricals Ltd was last trading in BSE at Rs.428.8 as compared to the previous close of Rs. 411.75. The total number of shares traded during the day was 38512 in over 1715 trades.
The stock hit an intraday high of Rs. 439 and intraday low of 400.95. The net turnover during the day was Rs. 16050106. |
