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Q4 saw profits just in line despite better than expected sales numbers on account of margin
pressures, led by margin slump in the industrials business. Lower taxes in the quarter also helped
earnings. Domestic power business continued to remain subdued while international business
was strong.
Margins lower than expected; lower tax keeps profit in line.
In Q4, Crompton reported consolidated net sales of Rs29bn, 6% ahead of our estimates of
Rs27.4bn and an increase of 16%yoy
Operating profits were at Rs3.7bn, 5% lower than our estimates and down 7% yoy. EBIDTA
margins were down 320bps yoy at 12.8%, and 150bps lower than our estimates of 14.3%.
The key reason for this was the 230bps increase yoy in material costs and a 200bps increase
in other expenses, which were not enough to offset the 110bps savings in employee costs.
International business saw a growth of 28% in Q4 at Rs11.4bn, but operating margins were
down 530bps at 9.5%, while the standalone business saw a 176bps decline in operating
margins at 15%. They key difference is on account of the sharp drop in EBIT margins of the
industrial segment in our view.
PAT was Rs2.84bn, 2% lower than our estimate of Rs2.9bn, showing a growth of 7%. This
was on account of lower taxation during the quarter, with effective tax rate of 19.4% as
compared to 27% in the first nine months
Domestic power business subdued; international business drives power segment
The domestic power business continued to remain subdued , remaining flat on a yoy basis,
while the international power business saw a growth of 29%. Adjusted for currency , this
translates into a growth of 32%
EBIT margins also fell more sharply in the domestic business at 18.1%( down 140bps yoy) as
compared to 44bps drop
Industrial segment leads margin slump in Q4
In terms of segmental performance, consumer and industrial segments continued to lead the
sales growth at 20% and 25%yoy respectively at Rs5.5bn and Rs4.3bn respectively
While overall EBIT margins were down almost 300bps, it was led by a sharp 10% decline in
EBIT margins of industrial segment . Industrial margins at 15% in Q4 were the lowest during
the year as compared to 19% margins for the first nine months.
Margins for the consumers business were mostly flat at 14.3% (down 26bp yoy).
New MD to take over from June 1
The company has appointed Laurent Demortier as the successor to Mr. Trehan from June 1.
Mr Demortier was earlier the President of the Power Automation and Control business of
Alstom.
Review our numbers post conference call
We maintain Buy with a TP of Rs330 . The stock is currently trading at FY12F P/E of 17x. We
will review our numbers post management conference call.
Key things to watch out for in the call would be reason for margin slump in Q4,
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q4 saw profits just in line despite better than expected sales numbers on account of margin
pressures, led by margin slump in the industrials business. Lower taxes in the quarter also helped
earnings. Domestic power business continued to remain subdued while international business
was strong.
Margins lower than expected; lower tax keeps profit in line.
In Q4, Crompton reported consolidated net sales of Rs29bn, 6% ahead of our estimates of
Rs27.4bn and an increase of 16%yoy
Operating profits were at Rs3.7bn, 5% lower than our estimates and down 7% yoy. EBIDTA
margins were down 320bps yoy at 12.8%, and 150bps lower than our estimates of 14.3%.
The key reason for this was the 230bps increase yoy in material costs and a 200bps increase
in other expenses, which were not enough to offset the 110bps savings in employee costs.
International business saw a growth of 28% in Q4 at Rs11.4bn, but operating margins were
down 530bps at 9.5%, while the standalone business saw a 176bps decline in operating
margins at 15%. They key difference is on account of the sharp drop in EBIT margins of the
industrial segment in our view.
PAT was Rs2.84bn, 2% lower than our estimate of Rs2.9bn, showing a growth of 7%. This
was on account of lower taxation during the quarter, with effective tax rate of 19.4% as
compared to 27% in the first nine months
Domestic power business subdued; international business drives power segment
The domestic power business continued to remain subdued , remaining flat on a yoy basis,
while the international power business saw a growth of 29%. Adjusted for currency , this
translates into a growth of 32%
EBIT margins also fell more sharply in the domestic business at 18.1%( down 140bps yoy) as
compared to 44bps drop
Industrial segment leads margin slump in Q4
In terms of segmental performance, consumer and industrial segments continued to lead the
sales growth at 20% and 25%yoy respectively at Rs5.5bn and Rs4.3bn respectively
While overall EBIT margins were down almost 300bps, it was led by a sharp 10% decline in
EBIT margins of industrial segment . Industrial margins at 15% in Q4 were the lowest during
the year as compared to 19% margins for the first nine months.
Margins for the consumers business were mostly flat at 14.3% (down 26bp yoy).
New MD to take over from June 1
The company has appointed Laurent Demortier as the successor to Mr. Trehan from June 1.
Mr Demortier was earlier the President of the Power Automation and Control business of
Alstom.
Review our numbers post conference call
We maintain Buy with a TP of Rs330 . The stock is currently trading at FY12F P/E of 17x. We
will review our numbers post management conference call.
Key things to watch out for in the call would be reason for margin slump in Q4,
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