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ECD drives growth; Butterfly recovers

Crompton Greaves Consumer Electricals (CROMPTON IN) posted healthy topline growth, led by the Electric Consumer Durables (ECD) segment, especially fans, small domestic appliances (SDA) and pumps. Lighting witnessed some stability despite industry-wide price erosion. Margin for Butterfly Gandhimathi (BGAM) expanded, showing signs of recovery. We raise our TP to INR 475 (from INR 455) on 36x December FY26E P/E. Competitive intensity may curb margin expansion beyond 13% for CROMPTON as also arrest recovery at BGAM. We reiterate Buy, led by robust growth potential in emerging categories, turnaround at BGAM, attractive valuations and 11% underperformance versus the Nifty in the past three months.

ECD leads topline growth: CROMPTON’s revenue grew by 5% YoY, led by steady growth in the ECD segment given festival season demand. The ECD segment (72% of Q3 sales) grew by 7% YoY, led by robust growth in fans, pumps and SDAs. Fans grew given rising demand for table, pedestal and wall (TPW) fans. CROMPTON expects TPW and ceiling fans industry to grow in double digits in FY26. Air coolers witnessed the highest-ever pre-season sales in Q3. Mixer-grinder grew 46% YoY, keeping CROMPTON’s market leadership intact therein. Pumps grew 19% YoY, led by robust demand in solar pumps. The Lighting segment (15% of sales) grew 4% YoY. CROMPTON expects the momentum to continue in Lighting (with margin maintained) despite price erosion in the industry

Margin expands led by operating leverage and lower ad spends: CROMPTON continued on its margin improvement trajectory, led by internal cost optimization, lower ad spends and rising contribution from premium products. In Q3, margin improved 170bps YoY to 10.6%. Segment-wise, EBIT margin in ECD jumped 160bps YoY to 15.2% and in Lighting dropped 40bps YoY to 10.8% in Q3.

BGAM – Showing signs of recovery: BGAM’s revenue remained flat YoY at INR 2.3bn, yet EBITDA margin spiked 620bps to 7.2% in Q3. As per the management, initiatives to revamp BGAM are yielding positive outcomes. The revenue decline was arrested in Q3 and gross and EBITDA margin expanded.

Reiterate Buy with a higher TP of INR 475: We have incorporated BGAM’s financials into CROMPTON. We raise our FY25E EPS by 3% led by higher premium contribution improving margin. We retain FY26E estimates but pare FY27E EPS by 6% as the competition may curb margin expansion. We raise our TP to INR 475 from INR 455 on 36x (from 35x) December FY26E P/E, led by long-term margin at 13% for CROMPTON, a recovery in BGAM and the Budget focusing on revamping consumption demand.

We reiterate Buy led by strong growth potential in pumps and appliances, synergy benefits from turnaround at BGAM (in appliances), and attractive valuation of 32x FY26E P/E versus the industry’s 35x. The stock has underperformed the Nifty by 11% in the past three months. Expect an earnings CAGR of 26% in FY24-27E with average ROE of 33% in FY25E-27E.

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