MOSL: CROMPTON GR. CON (Buy)-Market share gains evident across categories
Crompton Gr. Con: Market share gains evident across categories
(CROMPTON IN, Mkt Cap USD2.3b, CMP INR268, TP INR305, 14% Upside, Buy)
ECD segment registers strong growth defying any economic slowdown
- Crompton demonstrated strong show in the ECD segment with market share gains across key categories. Management is optimistic on growth outlook and hasn’t witnessed any meaningful slowdown in its core categories. Channel stocking in fans segment for upcoming summer season is key.
- We maintain our earnings estimates and Buy rating with TP of INR305.
In-line results; cost initiatives drive margin expansion
- Crompton’s 3QFY20 revenue grew 4% YoY to INR10.7b (in-line). EBITDA grew 8.6% YoY to INR1.4b and was 4% ahead of est. EBITDA margins expanded 60bp YoY to 12.8% (v/s est. 12.0%) on the back of favorable mix, cost cutting initiatives and improvement in processes. Due to superior cash flow generation, other income came in at INR174m (v/s est. INR120m). PAT grew 30% YoY to INR1.04b (in-line). There was a tax write-back of INR574m, resulting in reported PAT growth of 102% to INR1.6b.
- For 9MFY20, cash flow from operations stood at INR3.5b (9MFY19: INR1.4b); FCF stood at INR3.3b (9MFY19: INR1.3b). At the end of 3QFY20, the company had net cash position of INR1.8b.
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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Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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