Dear All,
Forwarding you the Result Update on Crompton Greaves for 4QFY2011 with a Buy recommendation and a Target Price of `300 (12 Months)
For 4QFY2011, Crompton Greaves (CG) reported lower-than-expected numbers. On a consolidated basis, the company posted decent revenue growth of 16% yoy to `2,908cr (`2,508cr), which was slightly higher than our estimate of `2,771cr. With decent valuation and strong long-term prospects, we maintain our Buy recommendation with a revised target price of `300 (`330).
Margin erosion plays a spoilsport: For 4QFY2011, CG posted 16% yoy growth in its consolidated revenue, mainly driven by the industrial and consumer segments, which grew by 25% and 19.6%, respectively (rupee terms). The margin eroded sharply by 323bp yoy to 12.8%, higher than our expectations of 191bp, which resulted into a 7.3% yoy decline in EBITDA to `373cr (`403cr).
Outlook and valuation: Order inflows from PGCIL have been relatively low during FY2011. Further, concern prevails over margin pressures arising on account of higher commodity prices and increased competition going forward. However, industry commentary indicates that ordering activity from PGCIL is likely to gather pace after 1HFY2012, which will benefit CG in terms of order intakes. Despite margin compression, pricing pressures and heightened competition, we believe higher growth in international subsidiaries coupled with margin improvements can offset the prevailing softness in the domestic power T&D segment. The stock quotes at 16.4x and 13.4x FY2012E and FY2013E EPS, respectively. We maintain our Buy recommendation on the stock with a revised price target of `300 (`330).
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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