Crompton Greaves Ltd - Q1FY12 Result Update ::Unicon

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Crompton Greaves Ltd - Q1FY12 Result Update

Crompton Greaves Ltd (CGL) consolidated revenue came significantly below Unicon’s and Consensus estimate due to muted growth at subsidiary level and margin erosion both at standalone and subsidiary level. Consolidated revenue for Q1FY12 marginally grew by 5% YoY to INR 24.3bn. While standalone revenue was up 9% YoY, revenue at subsidiary level remained muted for the quarter. The operating profit at INR 1.8bn was down 38% YoY. Lower operating profit margin was due to higher input cost and staff cost. While operating profit margin at 12.7% reduced 288bps YoY on standalone basis, CGL’s subsidiaries made operating loss during the quarter under review against profit of INR 9mn during same quarter last year.

Interest for the quarter rose sharply by 118% to INR 110Mn, primarily to fund its growth plan at subsidiary level and higher working capital days. Lower sales, higher raw material and funding cost caused its net profit after tax to decline by 59% YoY to INR 778Mn. CGL’s power system segment profit declined by 74.2% despite marginal growth of 4% in its sales due to higher input cost and volatile commodity prices.

Outlook & Valuation

Given the a) intense competition in power segment with higher & volatile commodity prices in domestic market b) poor sentiments in overseas market in general and European region in particular, c) higher working capital cycle and cost of funding, we estimate EPS of INR 10 compared to INR 15 earlier for FY12e. Downgrade to Hold for price target of INR 190.

Thanks & Regards

Unicon Wealth Research