Shares of an electrical equipment manufacturer gained as much as 6.14% on Wednesday trades to reach an intraday high of ₹ 316.35 apiece on the National Stock Exchange (NSE). This happened after the company disclosed a strategy that could lead to double-digit revenue growth. Its shares settled at ₹ 308.55 apiece.
The company in its management meeting held on Wednesday morning said that it has identified and is looking to plug crucial gaps in its portfolio that includes fans, pumps, and lights. Moreover, the company will increase the contribution from nascent categories such as small & kitchen appliances.
Crompton Greaves’ management believes that the new growth strategy would result in double-digit revenue growth. Moreover, its growth in the near term could be at the cost of margins.
After muted earnings in the first quarter of the current financial year, Crompton Greaves unveiled the so-called Crompton 2.0 strategy to improve operational efficiency and product marketing. It plans to divide its business into strategic business units to improve accountability and create separate on-ground sales teams for multiple products.
Moreover, the company plans to premiumize its product portfolio and enter switches, switchgear, wires and cables business which seems to have improved investor sentiment.
ICICI Securities has maintained a buy rating on the stock with a target price of ₹ 350.00. This translates to an upside of 13.43% as compared to its current share price. The brokerage sees a strong potential in Butterfly Gandhimathi to aid Crompton’s business, considering that despite lower overall revenue, it generates ₹ 300.00 crore from the e-commerce channel, higher than ₹ 250 crore earned by Crompton.
Meanwhile, CLSA has upgraded the stock to buy, with a target price of ₹ 365.00. This implies an upside of 18.30% as compared to its current share price. CLSA believes that the new restructured organisational team will enable the company to perform better in the long run.
Crompton Greaves Consumer Electricals is one of the leading consumer companies in India with a 75+ years old brand legacy. It is an independent company under professional management and has 2 business segments – Lighting and Electrical Consumer Durables. It markets its products under the brand name “Crompton” in India and select export markets.
With a market capitalization of ₹ 19,066 crores, Crompton Greaves Consumer Electricals is a small-cap company. It has an ideal return on equity of 18.12% and an ideal debt-to-equity ratio of 0.38. Its shares were trading at a price-to-earnings ratio (P/E) of 41.78, which is higher than the industry P/E of 13.96, indicating that the stock might be overvalued as compared to its peers.
Written by Simran Bafna
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