Highest ever margins in Q2FY21 push Crompton Greaves' shares to 52-week high1 min read . Updated: 23 Oct 2020, 11:16 AM IST
- Crompton Greaves' standalone revenues for the Sep wquarter have increased by 11.4% year-over-year to ₹1,198 crore
- While 78% of the company's revenues came from electric consumer durables, the remaining revenues came from the lightning products segment
Shares of Crompton Greaves Consumer Electricals Ltd touched a new 52-week high on NSE in early trading hours on Friday. This was not without reason, as the company’s September quarter results, announced on Thursday after market hours, have exceeded Street expectations.
Standalone revenues increased by 11.4% over the same period last year to ₹1,198 crore. A Bloomberg poll of analysts had pegged revenues at ₹998.20 crore. September quarter revenue growth was driven by a neat 18% increase in electric consumer durables (ECD) segment. The ECD business contributed nearly 78% of Crompton’s revenues. The remaining revenues came from the lightning products segment, revenues from which declined by 7.3% against last year’s same quarter.
Further, cost control measures helped margin expansion. Overall, earnings before interest, tax, depreciation and amortisation (Ebitda) margin increased by 347 basis points to 15.5%. One basis point is one-hundredth of a percentage point. Employee cost and other expenses declined by 1.7% and 3%, respectively.
Sonali Salgaonkar, analyst at Jefferies India Pvt. Ltd said the margin is Crompton Greaves’ highest level ever.
Absolute Ebitda growth stood at robust 43.5% year-on-year. Earnings before interest and tax (Ebit) margin of both segments expanded as well. A report by Edelweiss Securities Ltd on 22 October said, “Cost measures, growth pick up and input cost benefits aided margins across ECD, while positive surprise on lighting imply industry-wide stabilisation." The brokerage firm added that “cash flow improved significantly led by stable working capital improvement."
The company's net profit for the September quarter stood at ₹137 crore, far higher than Bloomberg's consensus estimate of ₹95 crore.
After touching a high of ₹329 per share on Friday, Crompton Greaves’ stock corrected from that level. At the time of writing, the stock price had increased by more than 6% to close to ₹306. Based on Bloomberg data, the shares trade at nearly 38 times estimated earnings for FY22. According to Jefferies key risks include extended demand slowdown, raw materials volatility and pricing pressures.