Crompton Greaves has reported a spectacular performance for Q4FY2009 in terms of both stand-alone business and consolidated business. The performance has surpassed our as well as the street’s expectations.
On a stand-alone basis, the revenue of the company grew by 17.4% to Rs1361.8 crore. The revenue growth was led by a 28.6% rise in the revenue of the power system division.
The company has delivered a strong operating performance for the quarter with a 240-basis-point improvement in its operating profit margin (OPM).
The margin improvement was possible because the company saw a significant reduction in its raw material cost, which as a percentage of sales fell by 410 basis points year-on-year (y-o-y), during the quarter.
The interest cost fell by 48.4% to Rs3.8 crore. Consequently, the net profit grew by 20.3% to Rs124 crore. The profit growth was above our estimate.
Led by a 27.5% growth in the revenue of the power system business, the net revenue of the consolidated entity rose by 21.7% to Rs2,460 crore, surpassing our estimate.
The OPM of the consolidated entity remained almost flat (down nine basis points) y-o-y at 13.4%. The interest cost fell by 34.1% y-o-y to Rs12.8 crore.
Consequently, the net profit of the group rose by 34.2% to Rs194 crore, which was significantly higher than our estimate.
The unexecuted order book of the stand-alone entity grew by 30% while that of the consolidated entity expanded by 20% during the quarter.
After the quarter’s strong performance both we and the street shall need to upgrade the estimates for the company.
We put our price target for the stock under review and would revise the same. Meanwhile, we maintain our BUY recommendation on the stock.