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Emkay Global
Crompton Greaves (Buy)
Target: ₹480
CMP: ₹403.25
Crompton Greaves Consumer Electricals has delivered strong performance in Q4, with EBITDA beating our expectations by 6 per cent. Electric Consumer Durables (ECD) segment revenues saw a healthy 2-year CAGR of 17 per cent, driven by growth across product categories and channels, market share gains in fans and rural expansion.
After many challenging quarters, the lighting segment registered 15 per cent y-o-y growth in revenue, supported by 23 per cent volume growth in the B2C business. Despite weak B2G business, EBIT margins expanded by 841bps y-o-y to 16.1 per cent, driven by cost optimisation.
Currently, channel inventory for Fans is higher than last year. A gradual recovery in revenue is expected from Q2, similar to that of last year. Margins should remain impacted for 1-2 quarters due to commodity headwinds and the lag in implementing price increases.
We reduce FY22-23E EPS by 2-4 per cent as we factor in lower revenues and higher costs due to prevailing commodity inflation. Superior performance vs. peers and favourable valuations keep us constructive. Retain Buy with a revised target price of ₹480 (43x FY23E EPS) vs. ₹490.
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