MOSL: CROMPTON GR. CON (Buy)-In-line performance supported by healthy ECD sales
Crompton Gr. Con: In-line performance supported by healthy ECD sales
(CROMPTON IN, Mkt Cap USD1.9b, CMP INR220, TP INR270, 23% Upside, Buy)
- Operating performance in line with estimates: CROMPTON reported strong 3QFY19 sales at INR10.3b (up 10% YoY), in line with our estimate of INR10.2b, on healthy performance of the Electric Consumer Durables (ECD) segment (INR7.1b, +16% YoY). But, its Lighting segment disappointed, declining 2.4% YoY to INR3.2b. EBITDA grew 8% YoY to INR1.3b supported by better revenue mix and cost-saving program implemented by the company. EBIDTA margin compressed 20bp YoY to 12.2% on weak margins in the Lighting division (EBIT margins of 8.9% v/s 13.8% in 3QFY18). Net profit grew 15% YoY to INR0.8b, ahead of our estimate of INR0.7b, supported by higher-than-estimated other Income (INR124m v/s INR66m in 3QFY18). For 9MFY19, Sales/EBIDTA/PAT grew 11%/14%/18%.
- Op margin decline restricted to 20bp YoY, despite weak performance from the Lighting segment: Gross margins declined 140bp YoY to 31.7% impacted by input cost pressure and competitive intensity, limiting price hikes in business category. However, operating margin decline was limited to 20bp YoY to 12.2% supported by cost rationalization measures taken by the company. Although lighting margins declined by 500bp YoY, sequential margin improvement has been witnessed (+260bp), and Crompton expects margins in double-digits by next quarter-end. Consumer Durables, which accounted for 69% of revenue (v/s 65% in 3QFY18), registered 50bp margin expansion to 18.7%. Ad spends for 3QFY19 stood at INR190m as against INR160m in 3QFY18.
Crompton Greaves Consumer Electricals Limited manufactures and markets a range of consumer products. The Company's main products/services include lighting products (luminaries and light sources) and electrical consumer durables (fan and appliances and pumps). It operates through two segments: Lighting Products and Electrical Consumer Durables. Its Lighting Products segment comprises luminaires and light sources. Its Electrical Consumer Durables segment comprises fans, appliances and pumps. It offers ceiling fans, table fans, pedestal fans, wall mounted fans, domestic exhaust fans, special fans and personal fans. It offers lighting products, including lamps, consumer luminaires, solar and lighting automation. Its household appliances include geysers, mixer grinders, toasters and irons. Its pumps are classified into industrial, agricultural and domestic pumps, and offers surface pumps, submersible pumps, accessories and pumping systems.
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