Crompton Greaves- better-than expected results.:: Angel Broking

Visit http://indiaer.blogspot.com/ for complete details �� ��


Crompton Greaves (CG) reported better-than expected results for 2QFY2011.
On a consolidated basis, CG posted revenue growth of 9.5% yoy to `2,398cr
(`2,189cr), while PAT increased 10.5% yoy to `214cr (`193cr). We are revising
our estimates upwards and upgrade the stock from Neutral to Buy.



Riding high on demand revival: The power systems segment after reporting
negative growth for the last four quarters bounced back in 2QFY2011 registering
6.8% yoy growth on consolidated basis. On the back of revival in the construction
of wind farms in Europe and the ensuing demand for distribution transformers,
the overseas power systems segment registered 23% yoy growth. However,
adjusted for the Euro depreciation, the segment reported 6.8% yoy growth. On
the domestic front, revenue growth was led by the consumer products segment,
which reported strong 23.9% yoy growth, while the power and industrial segments
registered 6.6% and 17.6% yoy growth, respectively. On a consolidated basis,
CG reported 9.5% yoy growth in revenues to `2,398, while EBIDTA and PAT grew
8.6% and 10.5% yoy to `333cr and `214cr, respectively.

Outlook and Valuation: Revival in the overseas power systems coupled with
expected growth in the domestic power sector, industrial capex and the growing
consumer durables segment augur well for CG. Management continues to
maintain its revenue and profitability guidance for FY2011 despite remaining
cautious on the revival in wind farm constructions in Europe and the uncertain
outlook for the American markets. We have revised our revenue and earning
estimates upwards and expect the company to register top-line and bottom-line
CAGR of 11.7% and 4.2% respectively, over FY2010-12. At the current price, the
stock is quoting at 23.3x and 20.2x FY2011E and FY2012E EPS, respectively. We
recommend a Buy on the stock, with a Target Price of `375.