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Nomura Maintains Buy on Crompton Greaves but Cuts Target Price to Rs 292
- •Nomura keeps a Buy rating on Crompton Greaves Consumer Electrical while reducing the target price to Rs 292 from previous levels.
- •The target price-to-earnings multiple was lowered from 28x to 25x to account for near-term earnings risks driven by higher commodity costs.
- •Consolidated revenue for 2QFY27 reached Rs 22.6 billion marking an 18 percent year-on-year growth that surpassed estimates.
- •Electrical Consumer Durables revenue rose 19 percent year-on-year while lighting and Butterfly segments also posted strong double-digit growth.
- •The company implemented 15 to 16 percent price hikes year-to-date and successfully passed on about 80 percent of cost inflation.
Key Questions Answered
Nomura maintains its 'Buy' rating on Crompton Greaves Consumer Electrical but has lowered its target price to Rs 292 from the previous level. This adjustment factors in near-term earnings risks arising from higher commodity costs, with the brokerage cutting its target price-to-earnings multiple to 25 times from 28 times.
Crompton's consolidated revenue for 2QFY27 reached Rs 22.6 billion, marking an 18% year-on-year increase and beating estimates by 4% to 5%. The EBITDA margin came in at 9%, generating an EBITDA of Rs 2 billion which is up 24% year-on-year, while APAT rose by 28% year-on-year.
Management reported that all segments grew in double-digits year-on-year due to new launches and a premium mix, while supply chain and inventory have normalized. The company implemented year-to-date price hikes of 15%-16% to pass on roughly 80% of cost inflation, alongside new businesses in solar and wires contributing 10% of revenue.
