Crompton Greaves: Powering ahead

Outlook for the sector remains positive as the power utility market has remained largely unaffected by the economic slowdown.

Power equipment manufacturer Crompton Greaves has reported a 13 per cent rise in standalone revenue at Rs 1,223 crore for the quarter ended December 2009. On a consolidated basis, its revenue rose 4.5 per cent to Rs 2,189 crore, while net profit rose to Rs 194 crore as against Rs 121 crore in the corresponding quarter a year ago.

During the recently concluded quarter, consumer products and industrial systems led growth, with revenues from these segments increasing 27.2 per cent and 18.6 per cent, respectively. Despite 4.8 per cent growth in revenues, the power systems segment shrank 0.9 per cent on a consolidated basis, dragged down by the 3.9 per cent fall in revenues from the international power systems business.

There was healthy growth in margins. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins (standalone) expanded 370 basis points (bps) to 16.6 per cent due to savings on material costs. On a consolidated basis, margins improved 370 bps to 14.2 per cent. Margins in the consumer products segment increased 494 bps to 14.4 per cent, while that in the industrial systems segment rose 468 bps to 20.7 per cent.

Crompton Greaves plans to divest its 59 per cent stake in Malanpur Captive Power to Avantha Power & Infrastructure (APIL) at Rs 46.63 per share (aggregating to Rs 51.4 crore). The company’s board has also declared a bonus in the ratio of three shares for every four held.

Analysts suggest that the outlook for the domestic power systems remains positive as the power utility market has remained largely unaffected by the overall economic slowdown.

During FY2009-12E, analysts expect the company to register a topline and bottomline CAGR of 11.8 per cent and 20.7 per cent, respectively. The potential triggers would be acquisitions that would also help improve its market share.

Post-results, the stock moved up 7 per cent and closed at Rs 440 on Monday.