Midcap Consumer Durable Stock To Buy For 38% Returns, Trading Near 52 Week Low: Nirmal Bang

Nirmal Bang has a "Buy" on Crompton Greaves Consumer Electricals Ltd. (Crompton) for a target price of Rs 405 apiece. The brokerage sees a potential upside of up to 38% from its current trading price. Crompton is a midcap Consumer Durable sector company with a market capitalisation of Rs 18.637.81 crore. It is one of the leading consumer companies in India. It is an independent company under professional management and has 2 business segments - Lighting and Electrical Consumer Durables.

Crompton's stock performance, 52 week low & high and returns

The shares of Crompton is currently trading at Rs 293.40 apiece, down 0.86% from its previous close of Rs 295.95 apiece. The stock traded its 52 week high on 13th September 2022 at Rs 429 apiece and 52 week low on 20 March 2022 at Rs 278 apiece, respectively. Its current market price is trading near its 52 week low.

The shares gained 0.41% in the past 1 week. It has fallen 3.42% in 1 month and 13.31% in 3 months, respectively. It has fallen 20.13% in 1 year. It gained 52.36% in the past 3 years and 23.95% in 5 years, respectively.

Crompton and Butterfly merger to accelerate synergies, Buy for a target price of Rs 405 apiece

According to Nirnal Bang, Crompton Greaves Consumer Electricals Ltd (Crompton) and Butterfly Gandhimathi Appliances Ltd. (Butterfly) informed the exchanges about a Scheme of Amalgamation of Butterfly with Crompton on March 25, 2023. Upon merger, the public shareholders of Butterfly, as on the record date, will receive 22 equity shares of Crompton for every 5 equity shares held by them in Butterfly, as a consideration for the merger. Post-merger, the public shareholders of Butterfly will hold ~3.0% stake in the combined entity.

The management highlighted that the merger aims to unlock various revenue & cost synergies, achieve economies of scale by pooling the combined resources and provide an impetus to grow across all parts of India. The management further highlighted that the merger will enable more efficient allocation of capital and result in simplification of the corporate structure. It expects the merger to be completed in 12-14 months, subject to necessary statutory and regulatory approvals. It expects the merger to be EPS accretive from year one itself (FY24). Overall, Crompton aims to outpace industry growth, driven by premiumisation, continuous innovation and deeper distribution reach. Investments have been stepped up in advertising, rural programs, new business development, R&D and sourcing capability.

"The merger with Butterfly sets up a platform for a full-fledged kitchen appliances play for Crompton and will accelerate realization of cost as well as growth synergies over the medium term. We continue to maintain BUY on Crompton with an unchanged target price (TP) of Rs405, valuing it at 35x FY25E earnings," the brokerage firm has said.

Disclaimer - The stock has been picked from the brokerage report of Nirmal Bang. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.