Buy This Consumer Durables Stock For 35% Likely Return: ICICI Securities

ICICI Securities has assigned buy rating to consumer durables sector stock, Crompton Greaves Consumer Electricals with a target price of Rs 495 apiece. Crompton reported strong revenue growth of 22.7% YoY (standalone revenues declined 3.8%, due to unfavorable base and weakened consumer demand).

The mid-cap company has a market capitalisation of Rs 23,330.65 crore. The stock has given return of 67% in the last 5-years. Check key takeaways below:

1. Crompton Greaves Consumer Stock Outlook

The current market price of Crompton is Rs 366 apiece with an intra-day decline of 2.99%. The stock's 52-week high is Rs 493 apiece and 52-week low is Rs 312 apiece, respectively.

2. Crompton Greaves Segment-Wise Performance

Electrical Consumer Durables (ECD) and lighting reported revenue decline of 3.1% and 6.6% YoY, respectively. Fans business faced a slowdown due to BEE transition; however, share of premium fans has increased QoQ. B2C lighting was flat YoY. Rural and CSD channel reported YoY growth of 45%.

Contribution of alternate channels increased to 15% of total sales. Appliances, mixer grinders and geysers registered revenue growth of 12%, 15% and 6% YoY, respectively.

3. Improvement In Butterfly Business

Butterfly registered strong QoQ revenue growth of 45%; however, YoY revenues declined 5%. We note the EBIT margins improved sequentially to 11% from 8.6% in Q1FY23. We believe the company will likely continue to report healthy volume growth over FY23-24. We model Butterfly to gain market share gains as well as improve margins.

4. Valuation

We model Crompton to report PAT CAGR of 19.7% over FY22- FY24E and RoE of 26.9% in FY24E. We remain positive on the company's business model due to its competitive advantages and growth opportunities. We maintain BUY on the stock with revised DCF-based TP of Rs495 (implied P/E of 38x FY24E EPS).

5. About Crompton Greaves

It is one of the leading consumer companies in India with a 90+ years old brand legacy. As of February 2016, It is an independent company under professional management and have 2 business segments - Lighting and Electrical Consumer Durables. It markets its products under the "Crompton" brand name in India and select export markets.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. 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 check with certified experts before taking any investment decision.