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  • 27 Oct 2022
  • ICICIdirect Research

CROMPTON GREAVES CONSUMER REPORTS BELOW EXPECTED Q2FY23 PERFORMANCE ON TOPLINE, MARGIN FRONT

CROMPTON - 406 Change: 1.00 (0.25 %)

News:

 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).

View:

 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

Impact:

Positive.