Buy Crompton Gr. Con; target of Rs 270: Motilal Oswal

Motilal Oswal’s research report on Crompton Gr. Con

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%.

Outlook

We maintain our BUY rating, with a TP of INR270 (35x FY20E EPS, in line with its historical P/E multiple since listing).

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First Published on Feb 1, 2019 04:38 pm

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