Crompton Greaves-Motilal Oswal research report

 Crompton Greaves' (CRG) 3QFY13 operating performance was below
expectations, largely impacted by losses in overseas business, constrained
business environment in domestic power segment and restructuring costs.
 Consolidated revenue at INR29.7b, declined 1.9% YoY, in line with our estimate.
Reported EBITDA margin was 0.1%. Consolidated net loss was INR1.9b (PAT of
INR1b in standalone business and losses of INR2.9b in subsidiaries).
 3QFY13 results include non-recurring restructuring costs of INR2.04b (INR1.2b
of employee retrenchment costs and INR830m of other incidental costs) in
Belgium. Adjusted for these, consolidated EBITDA margin was 2.9% below
our estimate of 4.7%. Adjusted net profit was INR149m (Standalone: net
profit of INR1b; Overseas: net loss of INR924m) v/s our estimate of INR370m.
 Consolidated order intake declined 34% YoY (Standalone: down 19% YoY;
Overseas: down 45% YoY) from a very high base last year. Order intake in
overseas business was also lower on account of CRG's deliberate strategy to
focus on execution (consolidated order book up 35% YoY) at this phase of the
ongoing restructuring program, as factories are already running at full
capacity. Order intake in the domestic power segment was robust at INR7.5b,
in line with the quarterly run rate and largely driven by pick-up in SEB orders.
 Restructuring in Belgium has been concluded and all restructuring costs have
been fully provided for. In Hungary, FY13 production is expected at 9,000MVA
(v/s the usual 3,000-3,500MVA per year). The immediate focus areas are
delivery pick-up by customers (EUR17m revenue target in 4QFY13).
 We have cut our FY13/14 EPS estimates by 3/4%, led by lower margin
expectations in the domestic power business. Maintain Buy, with a target of
INR150 (up from INR131 with rollover to FY15E).

�� -->