BackResult Review: Crompton Greaves
Result Review: Crompton Greaves
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On a standalone basis, Crompton Greaves (CGL) reported topline of Rs13.6 billion, a growth of 17% y-o-y. EBITDA margin improved by 240bps to 15.9% on the back of better performance from both power and consumer segments.
PAT grew by 27% y-o-y to Rs1.3 billion. Consolidated revenue for Q4FY09 stood at Rs24.6 billion, an increase of 22% y-o-y, with EBITDA margin stable at 13.4%. PAT increased by 35.5% to Rs1.9 billion due a decrease in depreciation by 1% y-o-y to Rs299 million, higher other income and lower interest cost of Rs128 million (y-o-y decrease of 34%).
Current order book stands at Rs65 billion, a y-o-y growth of 20% and flat q-o-q. Standalone and international order book stand at Rs28 billion and Rs38 billion.
The management expects order inflow for the power segment to grow by 20% in FY10. We expect order inflow from the industries segment to be slow in H1FY10 and improve in H2FY10 if there is a pick-up in corporate capex.
Valuation
At Rs249, the stock is trading at 14.9x FY10E and 13.0x FY11E earnings of Rs16.8 and Rs19.2, respectively.
Although the power division is expected to continue its good performance, we are concerned about the slump in the distribution products internationally (33% of international sales), impact of an appreciating rupee (depreciating rupee had a 13-14% positive impact on FY09 international sales) and the traction in industry segment growth.
Keeping in mind the recent run up in the stock (100% return in 3months), the good performance in Q4FY09 and the positive impact of the power sector seem to have been priced in. We recommend REDUCE on strength.
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