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Earnings in line; broad-based growth momentum intact New businesses scale up; FY29 margin target reiterated

* Crompton Greaves Consumer Electricals (CROMPTON)’s 2QFY27 earnings were in line with our estimates. Revenue grew ~18% YoY to INR22.6b. EBITDA rose ~24% YoY to INR2.0b. OPM was up 45bp YoY at ~9.0%. Adj PAT grew ~38% YoY to INR1.2b.

* Management indicated that 2QFY27 performance was supported by strong double-digit growth across businesses. ~80% of commodity inflation has been passed on through pricing actions. ECD growth was led by fans and appliances, while Butterfly and exports also performed well. It continued to expand its solar rooftop and wires businesses. CROMPTON reiterated its FY29 EBITDA margin target of ~11-12% and its target of doubling annual revenue growth from ~15% currently.

* We largely maintain our earnings estimates for FY27/FY28E and expect ~14% earnings CAGR over FY26-28E, driven by growth in existing categories and supported by new businesses. It trades at 25x/22x FY27E/FY28E EPS. We value CROMPTON at 30x FY28E EPS to arrive at our TP of INR300. Reiterate BUY.

ECD revenue up ~19% YoY; margin at 11.6% (est. 12.8%)

* Consol. revenue/EBITDA/adj. PAT stood at INR22.6b/INR2.0b/INR1.2b (+18%/+24%/38% YoY and +6%/+1%/+1% vs. our estimates). Gross margin contracted 1.8pp YoY to ~30%. OPM increased 45bp YoY to ~9.0%.

* Segmental highlights:

1) ECD revenue grew ~19% YoY to INR16.3b, EBIT increased ~31% YoY to INR1.9b, and EBIT margin rose 1.0pp YoY to ~11.6%.

2) Lighting revenue increased by ~14% YoY to INR3.0b, EBIT declined ~5% YoY to INR385m, and EBIT margin dipped 2.6pp YoY to ~13%.

3) Butterfly revenue increased ~17% YoY to INR3.3b, EBIT rose ~11% YoY to INR246m, and EBIT margin declined 35bp YoY at ~7.4%.

* In 1HFY27, revenue/EBITDA/PAT grew 15%/20%/25% YoY to INR45.0b/ INR4.3b/INR2.6b. OPM increased 45p YoY to 9.5%. Operating cash outflow stood at INR2.4b vs. operating cash inflow of INR550m in 1HFY26 due to an increase of INR5.8b in working capital. Capex stood at INR355.7m vs. INR414.6m in 1HFY26. Net cash outflow stood at INR2.7b vs. net cash inflow of INR135.6m in 1HFY26.

Key highlights from the management commentary

* ECD segment benefited from healthy growth and operational efficiencies. Fans recorded double-digit growth, with BLDC fans growing ~40% through general trade, driven by portfolio interventions, improved distribution and increasing consumer preference for energy-efficient products.

* In Lighting, revenue was driven by ceiling lights and outdoor lighting in B2C, and industrial and indoor commercial lighting in B2B. Both B2B categories delivered strong double-digit growth

* Wire business, launched in South India in 1QFY27, is expanded into Punjab, Delhi and Gujarat.

Valuation and view

* CROMPTON’s 2QFY27 performance was in line with our estimates, driven by broad-based growth and pricing actions that helped offset commodity inflation. We remain constructive on its growth prospects, supported by BLDC fan penetration, improving product mix, and the scale-up of solar rooftop and wires. The refreshed brand identity and cost efficiencies should aid long-term growth and margin expansion, with management targeting 11-12% EBITDA margin by FY29.

* We estimate CROMPTON to report a CAGR of 13%/12%/14% in revenue/ EBITDA/PAT over FY26-28. We estimate its OPM to remain flat at ~10% in FY28E from ~10% in FY26. RoIC is expected to improve to ~25% by FY28 from ~23% in FY26. RoE is likely to be ~15% in FY28E vs. ~14% in FY26. CROMPTON trades at 25x/22x FY27E/FY28E EPS. We reiterate our BUY rating with a TP of INR300, based on 30x FY28E EPS.

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