Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Crompton Greaves Limited
Overweight
CROM.BO, CRG IN
Annual report analysis: Fundamentals sound, growth drivers in place
A close look at CG’s FY11 annual report strengthens our belief in sound
business fundamentals and balance sheet quality. While near-term competition
led pricing pressures may remain, we like steps taken by CG to sustain
margins. Recent acquisitions have been rational, transformer demand in
developed markets has seen significant revival, drivers of domestic
growth remain strong and valuations look attractive. We maintain OW.
Healthy volume growth in FY11 across segments: A consecutive year of
~13% dips in price realizations shadowed ~17% growth in domestic power
output in MVA terms. Overseas subsidiaries saw healthy volume growth
of over 25% in both power transformers and distribution transformers.
~21% revenue growth in overseas subs in Euro terms was shadowed by
negative impact of currency translation (~12%). Underlying growth in
consumer products was robust and ahead of market- fans grew by 31%,
lighting 16% and pumps by 29%. Rotating machine industry volumes grew
by 11% while CG’s industrial systems posted revenue growth of 19% amid
pricing pressures, providing more evidence of strong volume growth. The
composition of standalone revenue in FY11 is encouraging- ~21-27% of
sales across segments were through new products.
Dissection of 60bps EBITDA margin dip in FY11 to 13.4%. The margin
hit was led by RM while staff/SG&A costs partially mitigated commodity
price pressures. Despite dip in realizations and competitive pressures,
consolidated power systems EBITDA margins improved slightly owing to
productivity improvements and efficient procurement of RM. Margin dip
was entirely led by Industrial systems in FY11 as the company was unable
to pass on higher commodity prices to customers. Since Mar-q prices have
been revised upwards in the segment, as per management.
Balance sheet review: Net-D/E was ~0.05x as of Mar-11 and leaves room
to lever BS for future acquisitions. WC days have increased to 31 from 17
in FY10, owing to delays in acceptance of finished goods by domestic
power customers- but still well below historical levels. For 10 successive
years CG has generated +ive FCF, and FY11 RoE was ~32%, above peers.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Crompton Greaves Limited
Overweight
CROM.BO, CRG IN
Annual report analysis: Fundamentals sound, growth drivers in place
A close look at CG’s FY11 annual report strengthens our belief in sound
business fundamentals and balance sheet quality. While near-term competition
led pricing pressures may remain, we like steps taken by CG to sustain
margins. Recent acquisitions have been rational, transformer demand in
developed markets has seen significant revival, drivers of domestic
growth remain strong and valuations look attractive. We maintain OW.
Healthy volume growth in FY11 across segments: A consecutive year of
~13% dips in price realizations shadowed ~17% growth in domestic power
output in MVA terms. Overseas subsidiaries saw healthy volume growth
of over 25% in both power transformers and distribution transformers.
~21% revenue growth in overseas subs in Euro terms was shadowed by
negative impact of currency translation (~12%). Underlying growth in
consumer products was robust and ahead of market- fans grew by 31%,
lighting 16% and pumps by 29%. Rotating machine industry volumes grew
by 11% while CG’s industrial systems posted revenue growth of 19% amid
pricing pressures, providing more evidence of strong volume growth. The
composition of standalone revenue in FY11 is encouraging- ~21-27% of
sales across segments were through new products.
Dissection of 60bps EBITDA margin dip in FY11 to 13.4%. The margin
hit was led by RM while staff/SG&A costs partially mitigated commodity
price pressures. Despite dip in realizations and competitive pressures,
consolidated power systems EBITDA margins improved slightly owing to
productivity improvements and efficient procurement of RM. Margin dip
was entirely led by Industrial systems in FY11 as the company was unable
to pass on higher commodity prices to customers. Since Mar-q prices have
been revised upwards in the segment, as per management.
Balance sheet review: Net-D/E was ~0.05x as of Mar-11 and leaves room
to lever BS for future acquisitions. WC days have increased to 31 from 17
in FY10, owing to delays in acceptance of finished goods by domestic
power customers- but still well below historical levels. For 10 successive
years CG has generated +ive FCF, and FY11 RoE was ~32%, above peers.
No comments:
Post a Comment