- 27 Oct 2022
- ICICIdirect Research
Crompton Greaves Consumer reports below expected Q2FY23 performance on topline, margin frontCROMPTON - 295 Change: 1.10 (0.37 %)
On the revenue front, CGCEL reported revenue of ~Rs 1700 crore, up 23% YoY, led by acquisition of Butterfly. The core segments i.e. ECD and lighting segment revenue declined 3% and 7% YoY, respectively. The core segment revenues were hit by unfavourable base, channel de-stocking of fans and sharp fall in revenues of conventional lighting products. The EBITDA margin declined sharply fall by 409 bps YoY to 11.4%, led by a sharp increase in employee costs (up 38% YoY) and other expenses (51% YoY). The gross margin remained flat owing to launch of new products and improved product mix. PAT came in at Rs 126 crore, down 21% YoY, dragged by lower margin and sharp increase in interest costs (up 3x YoY).
We believe CGCEL’s Q2FY23 performance was impacted by higher base, lower rural demand and BEE transition led dealer de-stockings. On a three year CAGR basis, CGCEL’s revenue growth (of core business) at 7% remained lower due to poor performance of its lighting division (which recovered 93% to its pre-Covid level). On the margin front, the reported EBITDA margin at 11.4% is much lower than its pre-Covid level margin range of 13-14%. We believe this is largely due to lower operating leverage of its lighting and Butterfly segments respectively. We await management commentary on price hikes and margin outlook, going forward