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Crompton Greaves
Growth story intact
We expect CRG to outperform the sector given: 1) Continuing strength in its consumer
and industrial segments, 2) early mover advantage in the 765kV transformer market, 3)
improving outlook for its European subsidiaries driven by short-cycle distribution orders,
and 4) strong cost control in a rising commodity-price environment.
Concerns on rising competition unwarranted
We believe the concerns on rising competition are unwarranted as CRG has a relative
advantage over MNC T&D players given its early-mover advantage with PGCIL in
765kV orders. We expect progress in power-project completion to drive recovery in
T&D equipment demand over next two to three quarters.
FY12 guidance: Sales growth 16-18% with flat margins
Management has guided to 16-18% y-y consolidated sales growth in FY12, inline with
our estimates driven by: 1) Consumer segment growth of 25% y-y, 2) industrial
segment growth of 20% y-y, 3) double-digit growth in overseas entities and the
domestic power segment.
Valuation
CRG’s shares have corrected by 15% over last three months and it trades at 16.1x our
FY12 EPS estimates compared to its peers, trading at 23.0x. We value CRG using a
20X P/E ratio on our FY12 EPS of INR17.3/shr and maintain our TP of INR344/shr.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Crompton Greaves
Growth story intact
We expect CRG to outperform the sector given: 1) Continuing strength in its consumer
and industrial segments, 2) early mover advantage in the 765kV transformer market, 3)
improving outlook for its European subsidiaries driven by short-cycle distribution orders,
and 4) strong cost control in a rising commodity-price environment.
Concerns on rising competition unwarranted
We believe the concerns on rising competition are unwarranted as CRG has a relative
advantage over MNC T&D players given its early-mover advantage with PGCIL in
765kV orders. We expect progress in power-project completion to drive recovery in
T&D equipment demand over next two to three quarters.
FY12 guidance: Sales growth 16-18% with flat margins
Management has guided to 16-18% y-y consolidated sales growth in FY12, inline with
our estimates driven by: 1) Consumer segment growth of 25% y-y, 2) industrial
segment growth of 20% y-y, 3) double-digit growth in overseas entities and the
domestic power segment.
Valuation
CRG’s shares have corrected by 15% over last three months and it trades at 16.1x our
FY12 EPS estimates compared to its peers, trading at 23.0x. We value CRG using a
20X P/E ratio on our FY12 EPS of INR17.3/shr and maintain our TP of INR344/shr.
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