On a standalone basis, Crompton Greaves (CGL) reported revenue of Rs11.7 billion, a growth of 8.1% y-o-y, while the EBITDA margin improved 187bps to 14.8%.
This improved EBITDA margin was on the back of lower raw material cost which as a percentage of sales has come down to 67% as compared to 69% a year ago.
PAT grew by 29% y-o-y to Rs1.1 billion on the back of higher EBITDA margin and lower interest cost of Rs-6m.
Consolidated revenue for Q1FY10 stood at Rs21.9 billion, an increase of 7.4% y-o-y. EBITDA margin was 11.3%, an increase of 52bps.
PAT increased by 30% to Rs1.6 billion due to other income increasing by 332% to Rs239 million (included forex gain) and interest cost decreasing by 67% to Rs45 million.
The management expects the interest expense to be muted in FY10 as a result of lower debt levels and lower interest cost.
Current order book stands at Rs61 billion, a y-o-y growth of 2% and de-growth of 6.8% q-o-q. Standalone and international order book stand at Rs27 billion and Rs34 billion, respectively.
Outlook on international order inflow remains bleak, while domestically the order inflow is expected to improve in H2FY10 (mainly from the power segment).
At Rs303, the stock is trading at 18.3x FY10E and 16.4x FY11E earnings of Rs16.6 and Rs18.5, respectively.
Although the power division is expected to perform well, we remain concerned about the slump in the order inflow from the international business, impact of an appreciating rupee (depreciating rupee had a 13-14% positive impact on FY09 international sales) and the slowdown in the industry segment (domestic).
We, thus, maintain our REDUCE rating on the stock.