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Crompton Greaves
For 1QFY2012, Crompton Greaves reported 6% yoy growth in its top line to `2,438cr,
which was broadly in-line with our expectation of `2,486cr. Led by high raw-material
costs, EBITDA margin for the quarter witnessed a steep decline of 546bp yoy to 7.5%,
which was well below our estimate of 12.5%. The margin erosion was mainly attributable
to the power systems segment, which posted a steep contraction of around 800bp yoy to
2.6%. The industrial segment also suffered margin erosion of ~470bp, possibly due to the
execution of Nelco’s low-margin orders. The operational weakness resulted into EBITDA
decreasing by 38.8% yoy to `182cr yoy (`297cr). Disappointing operational performance
coupled with higher depreciation and interest expense resulted into PAT declining sharply
by 58.4% yoy to `79cr (`191cr). At the CMP of `208, the stock is trading at 13.7x and
11.2x its FY2012E and FY2013E earnings, respectively. Currently, the stock is under
review. We will revise our estimates and recommendation post the conference call.
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