Crompton Greaves Consumer Product: Brand Revival

Sorry I don’t track Cons Durable space. I feel this is a very much competitive space.

Due to the low barriers of entry there are very less chances of technological differentiation. As such, only way a company can remain relevant is by tying up with as many distributors as possible & by building brand.

Moreover, I don’t feel if there is any significant brand loyalty in this space (compared to FMCG), as any new company can come to this space (e.g. Xiaomi) and offer good features at low cost and quicky eat up the market share of the incumbents.

The only way to create strong brand in this space is by creating premium products, which most of the companies have started to make to some extent, and IIRC orient electric is trying to shift completely to premium segment. But remember, creating strong brand with premium products is not a piece of cake. Only Apple has been able to create premium product with strong brand recall (purchasing power) in Smartphone & Notebook segment (which I feel has lots in common with Cons Durable space) and stayed relevent till date.

Having said this, I feel that consumer durable segment is under-penerated & thus has lots of space to grow, although we don’t know which company will stay relevent even 5 years from now. I don’t invest in these companies because I prefer companies in stable industries with lesser rates of change & with lesser competition.

Update:

I mistakenly wrote that companies in Cons Durable Space suffer disruption risk. Actually this is not true. The companies in the space always run through changes (feature upgrades) which usually have low barriers in implementation. Disruption is caused when a change is difficult & time consuming to implement. So, IMO disruption is much less a possibility.

But the real issue is cut-throat competition and less brand loyalty. The OPM of these players is in sub-15% range. We need to monitor how this changes after premiumization.

Also, with the availability of Cons Durable products via eCommerce platforms the distribution-aided benefits have reduced quite a bit. IMHO this may be called a disruption of sorts.

However, this ‘disruption’ is not present in some of their products like Solar, Switchgears, Motors or Cables.

5 Likes

My notes from Crompton Consumer AR 2019:
Financial and Business Performance
• Total Income stood at 4,478.91 crore, growing by 11.1%, against comparable revenues last year. Profit After Tax stood at 402.52 crore, compared with ` 323.79 crore in the previous year with 23% growth

• Strong growth in the Electrical Consumer Durables (ECD) segment, with comparable revenues growing 15.9%

• Your Directors are pleased to recommend a dividend of 2 per Ordinary (Equity) Share of the face value of 2 each,

• With focus on premiumization and delivering superior consumer value, we launched a new range of decorative fans like Air 360 Deco, Calibre and Aura 2.0. Under Pumps, the Mini Crest range of products, launched a year ago continued to drive growth. Under Consumer Appliances, revamped our entire range of Water Heaters during the year, which led to our total Water Heater volumes growing 25%.

• In Lighting, the core LED business, excluding sales to EESL, grew 13% in value terms. This was despite continuing price erosion across the range.

• The launch of ANTI-BAC bulb, a truly unique innovation, is one example of this approach. The bulb kills up to 85% germs, providing a healthy and safe home environment.

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Fans

  • The domestic fan market is estimated at 50 million fans per year with volumes growing around 6-7%.
  • Market leader in Fans segment and has reported faster than industry growth during the year
  • Air 360 is one such innovative product which covers 50%* more room area. Another revolutionary product “VSenseTM” delivers high speed in voltage as low as 115 volts*, specifically targeted at regions with power fluctuations
  • It pioneered the launch of Air Buddy, a unique product that doesn’t disturb the cooking process and enables sweat free cooking. It launched Aura new which combines fluidic aesthetics and improved durability with 5 years DuratechTM warranty.
  • Working on products with improved technology, and also IoT and Artificial Intelligence-based products.

Pumps

  • The Water Pump industry is estimated to be ` 7,000 crore. The market for water pumps in India is expected to witness robust growth, driven by increasing urbanisation, depletion of groundwater and decline in water table.

  • Your Company has been amongst the fastest growing pump manufacturers, with a dominant share in the domestic segment. Both domestic and agricultural pumps segment have grown in double digits. Through its Channel Expansion programme, it is increasing its focus on Tier 2 and 3 cities.

  • Mini Crest, launched in December 2017, has been an initiative that enabled your Company to deliver industry-leading growth.

  • Expanding the market by leveraging the Mini Crest range of products. It is evaluating the Brushless DC Motor technology, which is a new technology for manufacturing solar pumps.

  • Monobloc (2HP) and open well (3 to 7.5 HP) pumps with wide voltage design, which perform effectively in wide fluctuations of supply voltage in rural areas. This variety is useful to farmers as there are no frequent repairs required and there is lesser downtime.

  • Many parts of the country have high TDS (Salty) and more sand content in borewell water where normal materials of construction do not sustain. Hence, 4WSS series of pumps with stainless steel impeller and diffuser for better reliability as well as efficiency were developed by your Company.

  • Solar pumping systems with MNRE certifications were developed in AC (5, 7.5, 10 HP) as well as BLDC (5 HP) motors and further development is in process. These Solar pumps deliver minimum 10 to 15% more discharge than MNRE guidelines.

Water Heaters

  • The Water Heater industry growth will be largely led by an increasing number of new residential units, coupled with rising per capita disposable incomes. As the share of households using branded water heaters rises, there is a robust runway for growth.
  • During the year, entire range of water heaters were relaunched, adhering to your Company’s strategy of providing innovative products to consumers. Five new aesthetically designed Storage Water Heaters and four Instant Water Heaters were launched.

.

Air Coolers

India’s Air Cooler industry is projected to grow robustly, driven by low penetration and conversion from unorganised to organised segment. The industry is increasingly witnessing a shift towards models with better features, advanced electronics and better performance.

Recorded double-digit growth in Air Coolers and revamped the portfolio. One of these new offerings is a Desert Cooler with auto-drainage facility and a mosquito net filter, which enables humidity control and offers easy cleaning.

In Air Coolers, a unique model “Optimus” which stands out in performance as compared to its peers was launched. It has features like Auto Drainage, easy cleaning, humidity control, thicker honey comb and highest air delivery in its class. This summer, new range of plastic window and tower coolers were also introduced.

Lighting

Lyor LED Lamps: Lyor LED Lamps, India’s first BEE rated 5-star energy-efficient lamps were launched during the year. It offers 20% energy savings, compared to 3-star rated LED Lamps, and 50% savings compared to conventional lamps.

e ANTI-BAC lamps. This anti-bacteria bulb is a health proposition which kills up to 85% of bacteria in the house and is certified by Indian Medical Association (IMA). The bulb, a true market differentiator, is priced at 15-20% premium

5-dimensional growth strategy

Brand Excellence:

Company has been investing in the brand to create awareness and develop the market with innovative products

Portfolio Excellence

  • Company remains focused on product innovation with consumer needs.
  • The Aura Anti Dust Fan with a 5-year DuratechTM warranty (the first Fan with a 5-year warranty) is one such example where the promise to the consumer is not just aesthetics, but reliable performance for many years
  • Entire range of Desert Coolers and our flagship product Optimus, with best-in-class air delivery and
  • Unique self-cleaning feature is reinventing the category
  • Launched a range of wide voltage pumps. These pumps which provide the desired water output, despite fluctuating voltage alleviates a current consumer pain-point.

Further, improving our design capabilities and building entry barriers in this space by registering our patents and designs

Go-To-Market Excellence

  • Your Company’s Go-To-Market strategy is aimed towards expanding distribution reach beyond Tier 1 and 2 cities and increasing market presence in untapped markets.
  • This initiative is now being deployed pan-India and supported with IT enablement. The focus of IT enablement includes creating a portal for dealers for automated ordering, secondary sales data integration and enabling sales field force.

Operational Excellence

Your Company’s aim is to deliver the best product quality, at lowest cost and improve product availability. The drive on cost optimization is aimed towards value engineering, new designs, alternative material usage and negotiation with vendors.

Organizational Excellence

Other Key Analysis/Information:

Online auctioning of services has been implemented with the help of SAP Ariba.

  • Vendor Scorecard Monitoring, which identifies strategic vendors and drives performance; and Vendor Portal, which is an automation software to interact with vendors, were also kick-started.
  • In the process of digitalising its dealer experience through implementation of a dedicated dealer portal. The portal is aimed to improve customer satisfaction resulting in ease of doing business.
  • Finance costs of 59.50 crore represents the interest cost on the Non-Convertible Debentures of 650 crore. However, 300 cr of debentures will be paid in July considering company is generating enough cashflows (having 650 cr of cash and investments) and hence next year expecting interest cost to come down to 30 Cr which should help in PAT margin expansion. Also, with reduced debt, slowly pledge should go off

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• Your Company has initiated vendor rationalisation, emphasis on in-house manufacturing and scorecard evaluation of vendors has been put in place.

• Your Company has decided not to pursue ESCO projects. • However, your Company is standardising the process for assessing the tenders/business opportunities througha) Defining Process framework & Go-No-Go parameters along with Authority Matrix; b) Digitalising Lead to Order process

• Management salary growth and remuneration as a % of PBT well under control. Good to see employee remuneration growth higher than management remuneration growth. Also, management remuneration has performance based variables component and still within limits

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FII decreased their holding and mutual funds increased their holding

Despite of 34% promoter holding, individual shareholders constitute only 8-9% of overall shareholding

Amansa increased stake but smallcap fund exited

Management Outlook

Your Company remains focused on three key objectives – growing sales faster than the market, operating profits in line with sales and converting all of the profits to cash. It expects growth to remain robust across all key segments with a combination of product innovation and driving go-to-market better and across more geographies.

Personal View

Since, Mr khosla did a 1-page communication to shareholders 2016 with simple, clear and measurable deliverables, he has walked the talk and continued the good work this year too visible both in financial numbers and overall business deliverables. Hoping double digit growth to continue with bit of additional benefit coming from debt reduction and interest reduction

Disc: Invested

9 Likes

Good results for Q1 FY19. Consolidated revenues up by 11.9% YoY (ECD segment grew by 16% while LED lighting segment saw good volume growth). PAT up by 17.6% YoY. What I also observed is that Amansa Capital has increased its stake in this quarter.

Disclosure - I am invested in this.

1 Like

I believe investors still mistake Crompton Greaves Consumer Product a part of Thapar’s Avantha Group, and thus this Co. trades at a lower valuation compared to its peers like Havells, TTK Prestige or Orient Electric.

1 Like

I think that is where business ability to continuously perform and investor conviction to hold and let the story play out matters. Valuation is not only a function of earnings but multiple things with with standalone and cross-impact in my opinion. Some of them are:

  1. Earnings growth
  2. Longevity of measurable historical performance
  3. Quality of balance sheet and cashflow
  4. Float and % of strong hands
  5. Theme playing out in market
  6. Governance flags and management integrity
  7. Overall market sentiment

Coming to crompton, market is tracking it distinctly only from last 2 years, so, there is a lack of traceable and measurable history with 2 years under new management, still there is debt on balance sheet, there is some pledge , relative float is higher and hence this could be reasons why it is not getting similar valuation apart from one to one comparison on earnings growth, roci, asset turns and various financial metric. However, those who have their answers for each of the above questions and have conviction why in long run debt would go off, pledge would reduce, why leadership is top notch etc. may have the conviction to hold given the story continues to deliver.

Since, I started the thread, it has almost been 2+ years and apart from minor hiccups here and there considering the way domestic economy has gone through, it has been a pleasant journey under leadership of Mr. Shantanu Khosla. He has been very crisp, clear and measurable in his communication and delivered on following grounds:

  1. Higher growth in premium fan market taking market share away
  2. Ability to deliver growth rate higher than industry and profitability higher than topline growth
  3. Gaining market share and ranking in lighting segment
  4. Showing strong grounds of creating more leadership verticals like geyser etc.
  5. Continuing innovation with successful product launches like dustless fan, bacteria free lighting etc.
  6. Ability to correct mistakes quickly (bringing growth back to pump business, fixing geyser and cooler business)
  7. Ability to deliver despite of strong raw material price increase
  8. Strengthening balance sheet quality (reducing lending rate for loans),getting rid of 50% of debt this year and hopefully remaining debt in next 2 years
  9. Not getting swayed away just on the name of acquisition but being prudent on capital allocation skills (letting businesses go - the videocon opportunity)

In summary, see most of the signs of management doing the right things and below are the points on which will be measuring future performance :

  1. Ability to keep growing topline over market and bottomline over topline (in cash profit terms)
  2. Ability to keep innovating
  3. Strengthening of balance sheet (net effect of interest income and interest expense should benefit to some extent and improve balance sheet perception in short run and debt free status in few years)
  4. Investments have gone into go market strategy, analytics and building additional business levers through newly hired teams and in my view they are yet to deliver to their full potential
  5. Continuity of innovation, product launches and market segment leadership
  6. Continuity of leadership team and how they build second leg of leadership to compete with the best
3 Likes

Notes from Q1FY20 concall:

Lighting Segment

  • LED overall volume growth at 12% (despite of traditional lighting degrowing at -21% and now less than 20% overall lighting business). 2% of value growth
  • In lighting business, B2B and B2C have almost equal share
  • Launched antibacterial bulb at 20% premium
  • Soft quarter for B2B due to elections. Significant investments done on B2B side (12 new key account managers hired) , salesforce enablement and returns yet to be made over these investments
  • B2B lighting has picked up in Q2
  • Larger conventional lighting business than Havels and hence, the hit is harder but now less than 20%. Also, still developing B2B business
  • Decline in lighting margin due to: Higher advertisement, Investments done for business strengthening and some provisions. This provisioning is out of a very conservative provisioning policy and money should come back
  • 10% margin in lighting is sustainable

ECD

  • Fans, pumps and appliances, all three delivered double digit growth
  • Agri pump is 20% of business
  • Geysers grew at 44%
  • Geysers and coolers are at positive EBITDA margin
  • Desert cooler Optimus launched, coolers grew at 138%
  • Plan to create 4th leg of business by building geysers and coolers
  • Gained further market share in fans
  • Premium fans grew at 24%

Other Points

  • Incremental 45 crore spent on advertising and sales promotion
  • Want to be at least no 2 or 3 in each product line
  • Construction market decline has levelled off and growing in mid-single digit
  • 300 crore of bond payment done out of internal accruals which was at 9% interest. Differential of other income on cash and interest cost would be additional profit
  • This year at maximum rate of tax
6 Likes

Business Update

  • Margins in pump segment have improved
  • Efficiency programmes continue to do well and cost cutting across segments continuing as per expectations
  • The ongoing price erosion in LED B2C business has stopped from this quarter and prices have stabilised
  • It will be another couple of quarters before value growth starts to appear in the lighting business because of the base effect and also if there is no price erosion ahead
  • The B2B part of the business remains challenging with deferment of orders from government and execution delays
  • Continuing to commercialise innovation pipeline and get new products into the various segments
  • Management feels challenging economic scenario presents a good opportunity to increase brand investments to build market share higher
  • Improvements in data availability, processes and planning capabilities have allowed the company to improve the period of settlement of schemes with dealers from 4 weeks to a week
  • The above has been a big advantage given the macro economic situation as this has improved the working capital of the dealers
  • The distribution strength and market share continues to increase along with cost efficiency measures

Participants

  • Edelweiss
  • SBI Mutual Fund
  • Citigroup
  • Jefferies
  • Bernstein
  • Credit Suisse
  • Investec
  • Motilal Oswal Asset Management
  • Anand Rathi Securities
  • IIFL
  • Franklin Templeton
  • Haitong
  • HDFC Securities

QnA

  • See lighting as a key strategic profitable long term business going ahead
  • The price erosion over last 4 months has ebbed and as we look at the global trend of the material costs the bulbs from a cost point of view are extremely efficient
  • Thus double digit volume growth should start translating into double digit value growth
  • Have not put up a new plant in lighting business
  • From a cost point of view in lighting business the company is already at an optimal level
  • Launching newer categories in fans and significant products in coolers which are much better than competition
  • On overall demand scenario in appliances segment not seeing a big slowdown apart from two pockets which is in agricultural pumps and B2B lighting business
  • In geysers market share has grown from 7-11% and the company is now in top 4 in this segment
  • The market share in ceiling fans is 27% up from 24% two years ago
  • One of the key focus is to go become a no.2 in each of the three appliances category of coolers, mixer grinders and geysers
  • The objective is to enter newer categories only when the management is sure of profitability in those new segments
  • No desire to drive pricing erosion in any market ever
  • In bulbs business the company is cost leader in the market
  • Have invested heavily in advertising the geyser portfolio which traditionally is not a heavily advertise segment by other brands
  • 8-10% of the Total fans market is premium in nature
  • Around 95% of the ECD business is skewed towards the summer season
  • From Q4 the tax rate will normalise towards 25%
  • Growth in B2C lighting segment in terms of volume was 12-13%
  • Growth in B2B segment will come when investments in infrastructure will happen from private and government entities which is not happening as of now
  • According to management a fair margin in the lighting business would be in double digits
  • Have started paying off vendors earlier than earlier and hence getting higher discounts
  • Main focus is on growing revenues at a rate higher than industry and growing profits at a rate equal or higher than revenue growth
4 Likes

At the risk of being speculative,I feel Crompton Greaves CE could very well be at an inflection point.The lighting segment has been the big drag for them in recent quarters.In the call,the management sounded confident that the price erosion cycle there has bottomed out.Iirc,they mentioned that the last price drop was in Aug.,2019.Crompton continues to be the price leader in the lighting segment(trusting the management on this!) In the ECD segment,they have made very good in-roads in the geysers market.It is notable that this product has <30% “reach”,i.e.,there is very good scope to grow this product without much investment.Though on on overall basis,geysers is still a small revenue stream for them.Interestingly,95%+ of Crompton’s ECD portfolio caters to the summer season.They claim to be the No. 2 player in the premium fans segment & it’s a fast growing market.One thing that was very assuring was that the company will not chase growth or act as a disruptor,throwing good money after bad.They want to maintain good pricing for whichever product segment they start to cater to.Recent track record gives credence to this.The company continues to have negative WC,strong return ratios & strong cash flows.With the base quarters reflecting poor pricing in the lighting segment,the growth will optically start to look much better in a quarter or two(this is assuming there are no unforeseen disruptions in the lighting market) And their ECD segment should do well in the summer season.Company hinted entry into some new segments but they were very guarded about the details.Even otherwise,I feel if they can do 15% kind of growth in revenues for a few years the stock should do well over the long term,i.e.,2-3 years+.Barring the last two days,the CGCE stock has been mostly rangebound from many months.I feel risk reward looks good here,if the execution continues the way it has.

Disc.: Invested.Views are biased.

6 Likes

I am confused as to why they increasing their pledge and does it hae significant impact to the company considering they are professionally run

I have just started tracking this company, and found 779.41 cr of goodwill on the total balance sheet size of 2751 cr . Do you have any idea why and when they recognized it?
Thanks
Edit: Found that it is because of demerger, but amount seems too high. Will have to check demerger details

CromptonGreaves-Q3FY16-ResultUpdate.pdf (159.0 KB)

1 Like

Notes from AR 2020

Key business updates:

  • Company is a major player in fans, LEDs, pumps and appliances category with number 1 position in fans and number 2 position in LEDs

  • Company has total 8 manufacturing plants in Goa, Vadodara, Ahmedabad and Baddi

  • Resumed production in all plants post covid shutdown

Business Segment:

Fans:

  • Launched Aura fluidic with 5-year warranty, first in the industry

  • Launched silentpro and energion in premium fans category

  • AS new BEE norms come in picture in FY21, company is in good position to transition the existing portfolio

Pumps:

  • Significant traction in mini crest models
  • Focus on tier 2 and 3 towns
  • Launched solar power pumps which provides 20-30% more wster output than required guidelines

Water Heaters:

  • Revamped entire portfolio with innovative measures
  • Great results in FY20 with market share and volume gains
  • Launched new products like Regalio, Wube, Rapid Jet

Air Coolers:

  • Steady growth in air cooler segment
  • Launched desert cooler range optimus, Genie neo and marvel neo

Appliances:

Have started revamping portfolio in kitchen and laundry care segment with launches like meo, Apollo, elie, brio and instalgide

Financial Performance:

  • Last 4 years since new management took over, revenue is up from Rs 4017 crore to Rs 4512 core, however, PAT is up from Rs 283 crore to Rs 495 crore due to product mix change and margin improvement

  • YoY PAT growth is 24% at Rs 495 crore and 4.76% growth in PBT (tax reduction benefit)

  • ECD revenue at Rs 3389 crore with 5% growth over previous year. Lighting segment revenue at Rs 1131 crore over Rs 1265 core in previous year. 75% revenue from ECD and 25% from lighting segment

  • Spent 2.2% of revenue on advertising and promotion (Rs 99 crore with respect to Rs 91 crore in previous). Advertising cost up from Rs 28 crore to Rs 49 crore

  • Finance cost reduced from Rs 60 crore to Rs 41 crore due to repayment of debentures of Rs 300 crore

  • Rs 18 crore spent on R&D

  • Net debt of Rs -237 crore with gross debt of Rs 350 crore maturing in next few months to few years

  • Considering Covid, not recommending any dividend this year to have cash position

  • Out of current Rs 350 crore NCD, Rs 170 crore matured in June 2020, however, considering Covid, company planning to go for fresh NCDs (Rs 300 crores) to have enough cash.

  • Company has maintained ~>50% ROCE for last 4 years

  • ECD segment displayed 5.5% revenue growth. Before Corona, this segment displayed double digit growth for the year.

  • Portfolio refresh of water heater and air coolers delivered significant traction in the market

  • LED segment delivered high single digit volume growth but pricing pressure continues though bottomed out during second half of year

  • Saved Rs 144 crore through cost control in project Unnati

  • Depreciation is up from Rs 12 crore to Rs 26 crore

  • Rs 410 crore of cashflow and average cash flow of last 2 years along with growth could be around Rs 350 crore

Annual Review of Management:

  • Go-to-market has enabled us to add quality channel partners and also improve distribution in existing geographies
  • Developed robust data infrastructure pan-India to enable smooth data flow, data collection and utilize data analytics including tools like tally patch, fieldf assist, dealer portal and utilization of salesforce.com
  • Company continued to work and delivering on these 5 aspects leveraging analytics capabilities in some of them
    • Brand excellence

      • Ramped up brand awareness to increase consumer recall for Aura ceiling fan with 5-year dura tech warranty and anti-bacterial LED bulb
      • Large scale advertising campaign for water heaters
    • Portfolio excellence

      • Pump with digital control panel with a single-phase preventive switch off feature
      • Inverter bulbs with back up capacity launched
    • Go-to-market excellence

      • Right product at right place according to channel and customer segmentation
      • Expanded presence in 60% of electrical stores
      • Tally patch implementation to track secondary sales covering 50% of company secondary sales
      • Dealer management website launched for order and stocks management
      • Targeting rural channel with towns with population of 50000 to 100000 through a focused approach
    • Operational excellence

      • App driven sales plan launched for sales productivity enhancement
      • More than Rs 100 crore cost saving through various operational initiatives
      • Investment and roll out of various technology initiatives in data and system and analytics
    • Organizational excellence

Market Trends:

  • Annual volume of fans is around 65 million units. At Rs 2000, this could be Rs 13000 crore market

  • Water pump industry is estimated at Rs 7500 crore

Guidance:

  • First quarter of FY21 is expected to be severely impacted. Normalcy could be restored only during second half of the year

Other Points:

  • Promoter and management remuneration within limits

  • Mid to high single digit increase in salary inline with growth in performance

  • 6% median increase in employee remuneration

  • 1771 employees on roll on year end

  • Average increase in employee remuneration other than managerial is 10.3% and for managerial, hike is 7.56%

  • Promoter stake down from 22% to 17%, MF/FII stake is up from 45% to 51%. Individual shareholders hold 7%

  • Audit fee reasonable

  • More than 50% of management compensation is variable which is good

  • Rs 779 crore is brand and goodwill on balance sheet

Risks and Open Questions:

  • There is 33% increase in inventory with 50% increase in stock in trade

  • Details of Rs 530 crore of mutual fund investment is not available

  • Doubtful trade receivable of 6-8% of profit ar Rs 23 crore. However, as per concalls (Rs 17 crore crore of receivable is only more than 1 year old), company has a conservative and prudent policy of provisioning where as actual losses may be lesser

  • Rs 165 crore of provisions made towards cost of obligations on account of product repair, warranty etc., cash discount etc. which looks a fair practice

  • There is a significant increase in contingent liabilities and need to be tracked

10 Likes

Very good results from Crompton

They have been able to achieve good topline growth while improving working capital even further.Margins ~15% now.Half year OCF is a very healthy 520 cr.However,the healthy revenue growth could also be on the back of pent-up demand and just better sentiment post “unlock”.The good part is that the lighting segment recovery has continued.Need to understand how sustainable these numbers are going into Q3 and more importantly,Q4.

2 Likes

Another share pledge by the company, already the promoters have pledged 65% of their shares pledged & now additionally this.
Isn’t this too much? The share prices have been doing fantastic, not getting into this stock seems like missing the ride, but then we see these deviations & are confused as to what to do.

Amalfiaco limited , the company to which shares were pledged had already in past sold shares of C&G in open market

Management Discussion & Concall Highlights Dec 2020

Financial Highlights

  • Crompton Greaves’ Q-3 F.Y. 2021 Revenue grew by 25.8% YoY due to strong growth in Electric Consumer Durable (ECD) Segment and Lighting Segment.
  • Lighting Revenue in Q-3 grew by 10% – INR 312 Crores, driven by healthy 13% Volume growth in B2C LED Lighting, while B2B Segment witnessed Demand headwinds from Institutions.
  • On the other hand, Revenue of ECD Segment in 3rd Quarter grew by 32% YoY – INR 1036 Crore, led by – 36% Revenue growth in Fans, 45% Revenue growth of Appliances. The Revenue of Premium Fans grew by 51%.
  • Revenue growth in Appliances primarily because of 50% YoY Revenue growth in Geysers and 25% growth in Pumps. In addition, the Premium Geysers grew strongly by 50%.
  • Moreover, Revenues from E-commerce channel saw 53% YoY growth in Q3 F.Y. 21.
  • Also, Company’s Sales from Rural regions increased 88% YoY in the 3rd Quarter of F.Y. 2021.
  • Crompton Greaves witnessed significant rise in EBIT Margin from 4.3% in Q3 F.Y. 2020 to 12.3% in Q3 F.Y. 2021.
  • As per the Management, this significant growth in EBIT Margin is the result of Price stability and various Cost rationalization initiatives by Company.
  • In addition, Net cash balance by the end of December 2020 is at INR 807 crore.
  • Profit After Tax (PAT) declined 6.1% YoY due to Tax written back by the Company.

Other Key Highlights

  • Crompton initiated Price hikes in the range of 5-8% from January 2021 onwards largely to offset rising Input Costs.
  • Management also stated that the Company’s focus on Price, Product Mix and Cost would help drive its future performance.
  • Company is continuously focusing on driving Sales through launch of Premium Products.
  • Further, the company has planned a phase wise expansion to increase its rural reach. In phase 1, Crompton plans to cover 400 Towns with population between 50,000 and 1,00,000, of which 75% is already covered.
  • Then in phase 2, the company is planning to cover 2000 Towns with population ranging between 20,000 and 50,000.
4 Likes

Complete exit for Advent

Crompton Greaves consumer

Key highlights from the management commentary

  • Fans grew 59% YoY in 4QFY21 (Jan-Feb’21: 29% YoY), driven by Premium Fans (+76% YoY) and Premium Decorative Fans (+72% YoY). CROMPTON gained 1% market share on a YTD basis. It has increased its reach in Fans by 3.3% on a YTD basis, with the brand now available in ~55% of total outlets. Pumps grew 61% YoY in 4QFY21 (Jan-Feb’21: ~18% YoY), with Residential/Agricultural Pumps growing 64%/53% YoY in value terms.

  • The Appliances business continues to grow exponentially at 74% YoY (JanFeb’21: 40% YoY) driven by core categories – Air Cooler (+74%), Mixer Grinder (+81%), Geysers (+87%), and Iron (+86%).

  • While CROMPTON has taken a 10-12% price increase across categories over JanMay’21, it has only covered 50-60% of commodity cost inflation, as commodity costs are up ~20% during the same period. Hence, the management expects margin pressure over the next two quarters.

  • Market share across various categories stood at: Fans and Residential Pumps: 27-28%, B2C LED: 8-10%, Water Heaters: 15%, and Mixer Grinder and Air Coolers: single-digit.

3 Likes

Did some scuttle butt on speaking to a couple of crompton dealers and as suggested by the stock price rise , the demand has been picked up quite well during the last six months. There seems to be quite an interest in the aura model ones which features in the premium category fans. As per the dealers, the bldc models irrespective of the brands haven’t really picked up much as expected and Crompton still seem to have a much higher brand value than the rest.

2 Likes

Good Results

2 Likes
2 Likes