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Crompton reported 3QFY11 numbers broadly in line with expectation in revenue
terms, while PAT was ahead of expectations. While domestic power system execution
remained muted on account continued poor off take by utilities, overseas subsidiaries
reported a decent 13% YoY growth in euro terms for 3Q revenues. Company has
seen an improving traction in domestic order intake in Power systems for the
quarter.
Stable execution in overseas subsidiaries; domestic execution
disappoints
Crompton continued to see an improved execution at its overseas subsidiaries
where PS division revenues for 3QFY11 grew by 13% YoY in euro terms, while it
remained flattish on a reported basis owing to depreciation of Euro vs INR for
3QFY11 on a YoY basis. Domestic PS division revenues remain muted at a mere
2% YoY growth. Led by strong volumes in consumer products and industrial
systems, standalone revenues grew by 14.3% YoY, while on a consolidated basis
it grew by 7% YoY.
Domestic OB improves; Consolidated OB at Rs 70.2 bn
Crompton reported a 25% YoY growth in standalone PS order book to Rs 37 bn
owing to improved domestic order inflows, while consolidated OB grew by 15.4%
YoY. Crompton is L1 in Rs 2.5 bn worth of PGCIL transformer orders, despite
strong competition from Chinese and Koreans. Management expects strong
orders in the second half of FY12E in the domestic market in PS.
FY12 consolidated revenue growth guidance at 16-18%
Management has guided for a 10-11% growth in domestic PS division, while
growth for overseas subsidiaries PS division targeted at 12-13%. Company has
guided for a 25-26% growth in consumer products, while guidance for industrial
systems stands at around 20%. Overall on a consolidated basis, management
remains confident of a 16-18% YoY growth for FY12E on a company level.
Outlook and valuations: Consistent performer; maintain ‘BUY’
Crompton Greaves has been consistently delivering earnings ahead of its peers
in the domestic market in the PS division. Also, while the management remains
confident of the overall 16-18% growth rates for FY12E on a consolidated basis,
we feel, diversified dominance augurs well for CGs sustainable growth track
record. Stock currently trades at a PE of 20x & 17x on FY11E & FY12E basis,
respectively. We maintain BUY/SO.
Company Description
Mumbai-based CRG, a part of the B. M. Thapar Group, is a pioneer in the management
and application of electrical energy. It is primarily engaged in designing, manufacturing,
and marketing high-technology electrical products and services related to power
generation, transmission, distribution, and executing turnkey projects. The company’s
business comprises three segments viz. power systems, industrial systems, and
consumer products. Nearly, two-thirds of its turnover comes from power segment, in
which, it enjoys leadership.
Investment Theme
Given the improving visibility and the government’s thrust on power sector reforms, we
believe that ~68,869 MW of generation capacity is likely to be added in India over the
Eleventh Plan, entailing investment of ~INR 4.2 tn. In the backdrop of encouraging
investment environment, we remain positive on CRG based on the prospects arising from
its second overseas acquisition (Ganz). Post full consolidation of Ganz in FY08, we
believe Crompton will not only expand horizontally (geographically), but also vertically
(enhanced product portfolio). We maintain our positive stance on the company.
Key Risks
Any delay in government spending in the power sector or any major policy change could
lead to a slowdown in investments from the utility companies, adversely affecting power
equipment companies like Crompton.
Higher raw material prices continue to remain a concern for Crompton and could hamper
growth in its operating margins, going forward.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Crompton reported 3QFY11 numbers broadly in line with expectation in revenue
terms, while PAT was ahead of expectations. While domestic power system execution
remained muted on account continued poor off take by utilities, overseas subsidiaries
reported a decent 13% YoY growth in euro terms for 3Q revenues. Company has
seen an improving traction in domestic order intake in Power systems for the
quarter.
Stable execution in overseas subsidiaries; domestic execution
disappoints
Crompton continued to see an improved execution at its overseas subsidiaries
where PS division revenues for 3QFY11 grew by 13% YoY in euro terms, while it
remained flattish on a reported basis owing to depreciation of Euro vs INR for
3QFY11 on a YoY basis. Domestic PS division revenues remain muted at a mere
2% YoY growth. Led by strong volumes in consumer products and industrial
systems, standalone revenues grew by 14.3% YoY, while on a consolidated basis
it grew by 7% YoY.
Domestic OB improves; Consolidated OB at Rs 70.2 bn
Crompton reported a 25% YoY growth in standalone PS order book to Rs 37 bn
owing to improved domestic order inflows, while consolidated OB grew by 15.4%
YoY. Crompton is L1 in Rs 2.5 bn worth of PGCIL transformer orders, despite
strong competition from Chinese and Koreans. Management expects strong
orders in the second half of FY12E in the domestic market in PS.
FY12 consolidated revenue growth guidance at 16-18%
Management has guided for a 10-11% growth in domestic PS division, while
growth for overseas subsidiaries PS division targeted at 12-13%. Company has
guided for a 25-26% growth in consumer products, while guidance for industrial
systems stands at around 20%. Overall on a consolidated basis, management
remains confident of a 16-18% YoY growth for FY12E on a company level.
Outlook and valuations: Consistent performer; maintain ‘BUY’
Crompton Greaves has been consistently delivering earnings ahead of its peers
in the domestic market in the PS division. Also, while the management remains
confident of the overall 16-18% growth rates for FY12E on a consolidated basis,
we feel, diversified dominance augurs well for CGs sustainable growth track
record. Stock currently trades at a PE of 20x & 17x on FY11E & FY12E basis,
respectively. We maintain BUY/SO.
Company Description
Mumbai-based CRG, a part of the B. M. Thapar Group, is a pioneer in the management
and application of electrical energy. It is primarily engaged in designing, manufacturing,
and marketing high-technology electrical products and services related to power
generation, transmission, distribution, and executing turnkey projects. The company’s
business comprises three segments viz. power systems, industrial systems, and
consumer products. Nearly, two-thirds of its turnover comes from power segment, in
which, it enjoys leadership.
Investment Theme
Given the improving visibility and the government’s thrust on power sector reforms, we
believe that ~68,869 MW of generation capacity is likely to be added in India over the
Eleventh Plan, entailing investment of ~INR 4.2 tn. In the backdrop of encouraging
investment environment, we remain positive on CRG based on the prospects arising from
its second overseas acquisition (Ganz). Post full consolidation of Ganz in FY08, we
believe Crompton will not only expand horizontally (geographically), but also vertically
(enhanced product portfolio). We maintain our positive stance on the company.
Key Risks
Any delay in government spending in the power sector or any major policy change could
lead to a slowdown in investments from the utility companies, adversely affecting power
equipment companies like Crompton.
Higher raw material prices continue to remain a concern for Crompton and could hamper
growth in its operating margins, going forward.
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