Prabhudas Lilladher has given Buy recommendation for Crompton Greaves Consumer Electricals with a target price of Rs. 530 in its research report issued on Oct 25, 2021
Prabhudas Lilladher’s research report on Crompton Greaves Consumer Electricals
We increase our FY22/ FY23/ FY24 earnings by 6.3%/ 2.7%/ 2% and reiterate BUY on Crompton. Crompton remains optimistic of sustaining double digit 2yr CAGR growth in H2FY22 buoyed by strong consumer demand further aided by tailwinds in real estate and infrastructure segments. Despite unprecedented RM inflation, Crompton has maintained the structural profitability of business and is confident of sustaining it through 1) pricing actions (3-4%/6-7% in 2Q/1H) 2) improving business mix 3) cost saving program (Project Unnati: Rs440mn saving in 2Q22, Rs380mn in 1Q22) and 4) advance booking of key RM at lower prices. We remain structurally positive on CROMPTON for longer term given 1) market share gains across core categories of Fans, Pumps and LED lights 2) sustained investments in LT initiatives (brand building, GTM, innovation, business processes & teams 3) well defined plan of entering and scaling up new categories (Water Heaters, Air Coolers, Mixer-Grinders) and 4) strong balance sheet (Sep21 net cash: Rs8.9bn).
We estimate 17.3% PAT CAGR over FY21-24 and assign a target price of Rs530 @ 42xSept23 EPS (Rs518 earlier). Maintain BUY.