Accumulate Crompton Greaves Consumer Ltd For Target Rs. 325 - Elara Capital
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ECD drives growth; lighting flat
Q3 revenue up 15%, driven by demand pickup in ECD
Crompton Greaves Consumer Electricals (CROMPTON IN) standalone revenue grew 15% YoY to INR 14.6bn in Q3FY24 at a three-year CAGR of 3%. It was 6% ahead of our estimates, driven by new product launches and demand uptick. Segment-wise, revenue from electrical consumer durables ([ECD]; 83% of Q3FY24 sales) increased 19% YoY vs Havells’ 3% YoY, and V-Guard’s 11% YoY. Lighting (17%) reverted after a series of subdued quarters, with 1% YoY growth vs Havells’ 2%. Alternate channels delivered robust growth of 38% (eCommerce revenue doubled in Q3).
Fans, pumps and water heaters lead the way
In Q3FY24, the ECD segment grew 19% YoY, led by healthy traction in fans and appliances. Fans saw growth of 11%, due to improved performance of premium ceiling, domestic exhaust (Domex) and table, pedestal & wall (TPW) fans. CROMPTON currently has a market share of ~27% in fans. Pumps saw 28% growth, driven by aggressive push into the agricultural segments, with pumps posting 39% growth. CROMPTON holds a market share of 7-8% in pumps as on December 2023. Strategic price hikes in fans as well as pumps led to margin expansion in those segments. Water heaters continue to shine, with CROMPTON selling 0.3mn during the quarter, which is the highest-ever quarterly sales in this category. This was due to significant growth in eCommerce, wherein it is the leading company.
Valuation: reiterate Accumulate with a higher TP of INR 325
We have incorporated Butterfly Gandhimathi’s (BGAM) financials into CROMPTON. We lower our EPS by 7% for FY24E and 4% for FY25E on delay in Butterfly breakeven and continued ad expenses dragging margin. However, we raise our TP to INR 325 from INR 315 on 28x (unchanged) December 2025E P/E as we roll forward by a quarter. We reiterate Accumulate. With improved demand, there is a possibility of rerating as CROMTPON has a strong brand recall, industry-leading EBITDA margin, EPS-accretive acquisition of BGAM, and the go-to-market strategy. We expect an earnings CAGR of 17% during FY23-26E, with an average ROE and ROCE of 30% & 28%, respectively, during FY24-26E.
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SEBI Registration number is INH000000933
