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Cromp. Greaves: A stellar performance - Views on News from Equitymaster
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Cromp. Greaves: A stellar performance
May 20, 2009

Performance summary
  • Consolidated sales grow 28% YoY for the fiscal. Growth led by a 32% YoY increase in the power systems business.
  • EBIDTA margins for consolidated operations expand by 0.5% YoY during the fiscal. This is owing to lower cost of goods purchased for trading (as percentage of sales).
  • Consolidated net profits up by 38% YoY during the fiscal, helped by an expansion in operating margins, lower interest costs and lower depreciation.


Financial performance snapshot
Consolidated
(Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change
Sales 20,207 24,600 21.7% 68,323 87,373 27.9%
Expenditure 17,489 21,313 21.9% 60,864 77,417 27.2%
Operating profit (EBDITA) 2,718 3,287 20.9% 7,459 9,956 33.5%
Operating profit margin (%) 13.5% 13.4% 10.9% 11.4%
Other income 125 215 72.2% 655 587 -10.4%
Interest 195 128 -34.1% 700 655 -6.4%
Depreciation 304 299 -1.8% 1,263 1,216 -3.7%
Profit before tax 2,344 3,075 31.2% 6,152 8,672 40.9%
Tax 898 1,135 26.4% 2,054 3,047 48.3%
Minority interest (15) 7 (48) (17)
Share of profit/(loss) of associate 1 (7) 17 (9)
Profit after tax/(loss) 1,432 1,940 35.5% 4,067 5,599 37.7%
Net profit margin (%) 7.1% 7.9% 6.0% 6.4%
No. of shares 366.6 366.6
Diluted earnings per share (Rs) 11.1 15.3
P/E ratio (x) 16.9

What has driven performance in FY09?
  • Crompton Greaves (CG) grew its consolidated sales by 28% YoY during FY09. This growth was largely aided by the company’s power division, which grew its sales by over 32%. The segment increased its share in revenues to 70.4% during FY09, from 68% in FY08. As for the consumer products business, sales grew by 18% YoY. The industrial systems business grew by 19% YoY during the fiscal.

    Segment-wise performance
    4QFY08 4QFY09 Change FY08 FY09 Change
    Power Systems            
    Revenue (Rs m) 13,889 17,713 27.5% 46,668 61,745 32.3%
    % share 68.5% 71.8% 68.0% 70.4%
    PBIT margin 12.8% 12.7% 9.4% 10.1%
    Consumer Products            
    Revenue (Rs m) 3,403 3,703 8.8% 11,178 13,219 18.3%
    % share 16.8% 15.0% 16.3% 15.1%
    PBIT margin 10.9% 12.1% 10.8% 11.1%
    Industrial Systems            
    Revenue (Rs m) 2,680 2,976 11.0% 9,649 11,498 19.2%
    % share 13.2% 12.1% 14.1% 13.1%
    PBIT margin 20.5% 20.8% 20.3% 18.5%
    Others            
    Revenue (Rs m) 294 286 -2.5% 1,089 1,223 12.4%
    % share 1.4% 1.2% 1.6% 1.4%
    PBIT margin 3.4% 15.7% -0.3% 15.9%
    Total            
    Revenue (Rs m)* 20,266 24,679 21.8% 68,584 87,685 27.9%
    PBIT margin 13.4% 13.6% 11.0% 11.4%
    * Excluding inter-segment adjustments

  • CG’s operating margins expanded by 0.5% YoY during FY09. This was largely on the back of lower costs of goods purchased for trading (as percentage of sales).

  • CG recorded a 38% YoY growth in consolidated net profits during FY09. While this was duly aided by the expansion in operating margins, it was also helped by lower interest costs and lower depreciation during the year.

What to expect?
At the current price of Rs 258, the stock is trading at a multiple of 15.8 times our estimated consolidated FY11 earnings for the company. The company has outperformed our topline and bottomline estimates by about 9% each. As such, we shall have to upgrade our numbers in line with the company’s performance during the year. The company’s healthy performance is enthusing considering the weak economic environment during the year. We shall update our view on the stock post an interaction with the management of the company.

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