shares information on electric equipment Crompton Greaves

Crompton Greaves Ltd (updated - 02 Feb 2010)
Power equipment manufacturer Crompton Greaves has reported a13 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 one 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.
source - BS

Crompton Greaves Ltd (updated - 02 April 2010)
Crompton Greaves has concluded an arrangement for acquisition of Power Technology Solutions (PTS), an electrical engineering company based in the United Kingdom (UK) for 30 million pounds (around Rs 203 crore).

This will be the sixth major overseas acquisition by Crompton Greaves in a span of five years. Over the years, the company has made many strategic acquisitions overseas (Pauwels, Ganz, Microsol, MSE power and Sonomatra) where it has successfully restructured or turned around and scaled up the operations of the acquired companies.

“While these subsidiaries have been unable to grow in FY10 owing to unfavourable economic conditions in Europe and North America, we expect them to return to growth from FY11,” states an ICICI Securities report.

According to the management, PTS’ acquisition was a step towards achieving revenues of $8 billion by 2015. The acquisition spree has placed Crompton Greaves among the leading transmission and distribution companies in the world. PTS’ rich exposure to comprehensive electrical engineering space and diverse clientele base in the UK will help Crompton Greaves in expanding its geographical reach, analysts suggest. PTS is also looking to tap the opportunity in the renewable energy space, a growing market in the UK.

At present, more than 50 per cent of Crompton’s sales come from overseas markets. Earnings before interest, taxes, depreciation, and amortization (Ebitda) margins have moved up significantly in FY10, from 10.7 per cent in 9MFY09 to 13.2 per cent in 9MFY10. For FY11, Kotak Securities expects 14.4 per cent revenue growth and a 16 per cent growth in net profit, accompanied by stable Ebitda margins.

The stock ended 4.8 per cent higher on April 1 at the BSE at Rs 274 and trades at 17.7x FY2011E earnings and 15.6x FY2012 consensus analysts’ estimates.
source - BS

Crompton Greaves Ltd (updated - 14 May 2010)
Crompton Greaves’ consolidated financial performance in the March 2010 quarter was disappointing, as revenue grew marginally at 2 per cent to Rs 2,508 crore, compared to the same period a year ago. The domestic market, which grew at 19 per cent, supported the revenue stream.

The consumer products and industrial systems division aided this growth. However, international business, which accounts for around 45 per cent of total revenues, saw performance worsen, as revenues declined 19 per cent on a year-on-year basis. The company was reeling under the housing crisis, as its power distribution business, which contributes around 30 per cent to its international revenues, saw a decline.

However, operating profit margins improved, as the company managed material costs better. They grew 269 basis points to touch the 16 per cent zone. Despite lower revenues, the company managed to grow its margins by 500 basis points, as total costs were lower by 23 per cent.

Overall, all three business segments - industrial systems, power systems and consumer products - contributed to margin expansion.
Consolidated net profit margins expanded 433 basis points to 12.2 per cent from 8per cent in the previous year. The outlook for the transmission and distribution (T&D) sector is robust, with strong spending by the government and higher participation from private players in the power sector. However, competition is intensifying in the T&D segment, especially in the company’s key future focus area of the high-voltage transformer segment (400kv/765kv). Hence, sustaining high margins of 16 per cent in an expected high input-cost scenario looks difficult, say analysts.

Moreover, there are concerns over the fate of its international business, as the Eruozone crisis might take a toll on revenue growth. The stock, like its peers in the engineering and capital goods space, looks expensive at 17 times and 15 times price to estimated earnings for FY11 and FY12, respectively. Attractive acquisitions, faster recovery in developed key markets, and unlocking value from listing of its 32 per cent group power generation company Avantha power will reinforce positive outlook and lead to further re-rating.
source - business standard

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Crompton Greaves Ltd (updated - 03 Aug 2010)
Crompton Greaves was hit by a weak euro in the June quarter, with the currency depreciating by around 6.4 per cent during the period. As Europe is a key market for its subsidiaries, the seven per cent revenue rise was negated by the currency depreciation. The bid to secure the transformer business of Emerson Electric Company for a reported $400 million will hedge the company’s revenues from diversified geographies, reckon analysts.

Crompton Greaves can easily manage this amount, with around Rs 500 crore worth debt and a net worth of around Rs 2,500 crore. The move will also boost the power systems business that saw sluggish growth during the quarter. Overall revenues grew six per cent year-onyear to Rs 2,370 crore, while net earnings rose 18 per cent to Rs 190 crore. But, revenues from the power system business division slipped by around two per cent. The consumer products and the industrial systems jumped around 29 per cent and 15 per cent, respectively. Control over selling, general and administrative expenses buoyed operating profit margins by 160 basis points. Analysts at Macquarie Equities Research reckon there is room for a margin surprise in FY11 due to the cost-saving activities in the overseas. They expect a 14.6 per cent margin for FY11 compared to the management guidance of 14 per cent.

The power systems business, despite subdued revenue growth, is on a sound footing in terms of order intake. Consolidated order inflows rose 34 per cent yearon-year to Rs 2,730 crore. The current order book has an execution period of 11 months, whereas a typical order has lead time of six-seven months, point analysts. Hence, growth will not be phenomenal, but steady and consistent, they add. The prime concern will be the movement of the Euro, which has shown signs of improvement of late. The details of the Emerson deal can also prove to be a positive trigger for the stock.
source - business standard

Crompton Greaves Ltd (updated - 28 Oct 2010)
Crompton Greaves results were almost in line with analysts’ expectations, with no negative surprises in the September quarter. Consolidated revenues grew 9.5 per cent year-on-year (y-o-y), the highest in the past six quarters, to `2,398 crore.

The strong growth was led by a3.6 per cent rise in sales of subsidiaries, low-base effect (decline of nine per cent in the year-ago quarter) and seven per cent growth in the overseas power systems business. In euro terms, the top-line growth of subsidiaries was even stronger (17%).

Standalone revenues grew about 14 per cent to `1,445 crore, aided by 24% and 17.5% jump in consumer products and industrial systems businesses, respectively. The domestic power systems business continued to underperform (up 6.6 per cent), though better than the 0.4 per cent rise posted in the June quarter.

Consolidated operating profit margin (OPM) remained flat around 14 per cent, as standalone OPM jumped 324 basis points (bps) to around 20 per cent (a fiveyear high), but was pulled down by a 552-bps drop in subsidiaries’ OPM due to higher employee and other costs.

Going ahead, business momentum is likely to continue on the back of strong order inflows in domestic power systems, improvement in overseas power subsidiaries and traction in consumer products and industrial systems. A faster-than-expected recovery in sales in the developed markets can also provide upsides to the 2011-12 earnings.

In the medium term, the major positive triggers will be listing of Avantha Power, in which the company holds 41 per cent, and acquisitions (mainly to bridge the technological gap in industrial systems). The stock, at `320, trades at a high valuation of 20 times 2011-12 estimated earnings.
source - business standard