Crompton Greaves share price gains nearly 3% after Antique upgrades stock to buy, raises target price

In Friday's overall upbeat market, shares of Crompton Greaves Consumer Electricals climbed by about 3% after brokerage firm Antique upgraded the firm's stock to BUY with a revised target price of ₹503, indicating a possible 14% upside. Crompton Greaves share price opened at ₹425.35 apiece on BSE, the stock touched an intraday high of ₹435.40, and an intraday low of ₹422.65.

According to Ruchit Jain, Lead Research Analyst of 5paisa, Crompton Greaves share price has recently formed a higher top-higher bottom structure and is thus in an uptrend. The recent swing low in the range of 405–400 is a good support zone for the near term.

Antique brokerage stated that it upgraded the stock in light of the expected recovery in demand brought about by the notable increase in real estate sales and the uptick in demand in rural areas.

The brokerage house also noted that over the previous three years, Crompton's operational performance has suffered due to soft consumer demand, pressure on the margin from steep cost increases and an inability to pass those increases on to end consumers due to weak demand, integration issues following the acquisition of Butterfly, and management changes that have resulted in a change in Crompton's strategy.

Crompton's operational performance is anticipated to improve from FY25 onwards, helping the company deliver 27% earnings CAGR over FY24–27E as opposed to -10% CAGR over FY21–24, as a result of the market beginning to show signs of recovery, stabilising commodities, and the nearing end of the Butterfly restructuring.

For the quarter ending in March 2024, Crompton Greaves Consumer Electricals Ltd reported a 1.43% rise in consolidated net profit to ₹133.43 crore. In Q4FY24, the total income from operations was ₹1,961 crore, up from ₹1,790.96 in the same time the previous year.

Butterfly restructuring to help improve performance in FY25

By 1QFY25, according to Crompton, the company restructuring should be finished, at which point an improvement in Butterfly's operational performance is anticipated. Following its acquisition by Crompton in FY22, Butterfly's business performance has been below average. This is because Crompton has been restructuring the Butterfly business, increasing retail sales by focusing on modern trade, regional trade, and e-commerce channels, while decreasing its institutional and corporate businesses.

Product portfolio expansion coupled with network expansion to help lighting segment bounce back

The government sector and traditional markets are reviving B2B demand, and Crompton is growing its B2C portfolio by increasing the size of its ceiling light offering. As a result, we anticipate that the lighting segment's performance will improve and report 12% revenue CAGR and 16% earnings CAGR over FY24–27E.

Cash flow to be used to bolster balance sheet, turn debt free by FY25 end

“We expect the company to generate an annual FCF of ₹8 billion over FY24–27 and believe it is in a comfortable position to achieve its target by FY25 end,” the brokerage said.

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