Buy Crompton Greaves -In-line quarter; a positive management tone:: Credit Suisse,

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Crompton Greaves ---------------------------------------------------------- Maintain OUTPERFORM
In-line quarter; a positive management tone critical for outperformance


● While sales growth was in line, PAT growth was above estimates,
largely led by lower-than-expected taxes in the quarter. This
quarter was expected to be weak, as domestic T&D sales were
expected to be muted due to continued delay in scheduling of
delivery of orders by customers.
● We believe that with domestic sales growth tracking ~15% with
flat EBITDA margins, the risk to annual guidance is not substantial
and downward revisions, if any, should be modest. CGL needs to
achieve only 4% consolidated PAT growth in 4Q to meet FY11
estimates.
● International sales growth of ~10% (in euro terms) in 3Q was
ahead of estimates. CS Europe capital goods analyst, Simon
Smith, highlights that T&D orders in Europe should stay flat YoY
in CY11 versus a single-digit declines last year and a 25% decline
in CY09. Demand for medium voltage products is anticipated to
be stronger.
● A key driver in the medium term is management expectations for
FY12. With recovery in T&D evident from 4Q tenders, we expect a
positive tone from management. Maintain OUTPERFORM.