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09 MAR 2016
Crompton Greaves
BUY
INDUSTRY
CAPITAL GOODS
Rs 152
Target Price
Rs 178
Nifty
7,532
Sensex
24,794
CRG IN
627
95/1,416
651
Rs 204 / 114
3M
6M
12M
Absolute (%)
(18.5)
(8.4)
(13.2)
Relative (%)
(17.5)
(4.8)
0.9
34.42
31.00
FIIs
18.17
16.41
Source : BSE
Financial Summary
(Rs mn)
Net Sales
Adjusted EBITDA
APAT
Diluted EPS (Rs)
P/E (x)
EV / EBITDA (x)
RoE (%)
FY15
140,131
5,950
1,367
2.2
69.6
19.2
3.7
FY16E
118,282
3,795
(850)
(1.4)
(112.0)
31.0
(2.3)
FY17E
95,189
3,273
(791)
(1.3)
(120.3)
34.4
(2.2)
FY18E
105,055
7,053
2,521
4.0
37.7
16.5
7.0
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Particulars
Consolidated Net debt (As on 31-Dec-15)
Less: Automation business related debt
Debt related to entities sold
Investment and Loans from parent to the sold entities
EV of business sold
Less: Sale consideration
Shortfall
Loss per share
Rs mn
9,000
6,000
3,000
13,000
16,000
8,500
7,500
12.0
Rs mn
Revenue
Power
YoY (%)
FY15
FY16E
FY17E
FY18E
27,341
-3%
23,923
-13%
25,119
5%
27,631
10%
Industrial
YoY (%)
15,044
1%
15,797
5%
17,376
10%
19,461
12%
International subs
YoY (%)
62,540
2%
51,283
-18%
52,821
3%
58,103
10%
EBIT margins
Power - SA
Industrial - SA
International subs
8.1%
10.1%
-3.1%
6.0%
10.5%
-5.3%
7.0%
10.5%
-2.7%
7.5%
11.0%
2.7%
Page | 2
SOTP valuation
We value the international
automation business at 10x
FY18E EV/ EBITDA arriving at
a valuation of Rs7.4 bn. Our PT
of Rs 178/ share implies 17%
upside from current levels
With better quarterly
performance there exists
scope for improvement in
valuations for CG
Business
SA business (ex-consumer)
Consumer business
International business
Avantha Power Investment
SOTP
Method
P/E multiple
P/E multiple
EV/ EBITDA
P/B multiple
FY18E PAT
2,850
2,787
788
2,270
Multiple (x)
12.0
25.0
10.0
0.0
Valuation
34,206
69,670
7,375
0
VPS
55
111
12
0
178
Peer Valuation
Company
MCap
(Rs bn)
CMP
(Rs)
Rating
L&T
BHEL
Thermax
Crompton Greaves
Voltas
Cummins India
1,127
263
90
95
80
239
1,213
108
756
152
243
863
BUY
UR
SELL
BUY
NEU
BUY
TP
(Rs)
FY16E
1,222
23.3
NA
45.2
710
31.6
178 (112.0)
254
26.9
1,020
31.3
P/E (x)
FY17E
18.6
18.0
27.2
(120.3)
23.8
29.1
FY18E FY16E
15.4
2.4
11.9
0.8
27.1
4.0
37.7
2.6
21.6
3.5
25.3
7.5
P/B (x)
FY17E
2.2
0.7
3.6
2.7
3.2
6.7
FY18E FY16E
2.0 10.4
0.7
1.7
3.3 13.0
2.6 (2.3)
2.9 13.6
6.0 25.1
ROE (%)
FY17E FY18E
12.1
13.4
4.2
6.1
14.0
12.8
(2.2)
7.0
14.0
14.1
24.4
25.0
Page | 3
Income Statement
(Rs mn)
Net Revenues
Growth (%)
Material Expenses
Employee Expenses
SG&A Expenses
Total Expenses
EBIDTA
EBIDTA %
EBIDTA Growth %
Depreciation
EBIT
Other Income (Including EO
Items)
Interest
PBT
Tax
RPAT
Minority Interest
EO (Loss) / Profit (Net Of Tax)
APAT
APAT growth %
Adjusted EPS (Rs)
EPS growth %
Balance Sheet
FY14
134,806
11.5
91,353
19,521
17,113
127,986
6,820
5.1
78.0
2,621
4,198
FY15
140,131
4.0
95,305
19,936
18,941
134,181
5,950
4.2
(12.7)
2,620
3,330
FY16E
118,282
(15.6)
79,166
18,461
16,859
114,486
3,795
3.2
(36.2)
2,703
1,092
FY17E
95,189
(19.5)
61,405
16,784
13,727
91,916
3,273
3.4
(13.8)
2,798
475
FY18E
105,055
10.4
67,505
16,713
13,783
98,001
7,053
6.7
115.5
2,966
4,087
2,115
2,397
3,612
1,938
2,043
1,366
4,947
2,361
2,587
(143)
2,443
188.9
3.9
195.7
1,443
4,283
2,220
2,064
30
727
1,367
(44.1)
2.2
(44.1)
1,765
2,939
2,223
715
55
1,620
(850)
(162.2)
(1.4)
(162.2)
1,838
576
1,417
(841)
50
(791)
(6.9)
(1.3)
(6.9)
1,920
4,210
1,709
2,501
20
2,521
(418.8)
4.0
(418.8)
(Rs mn)
SOURCES OF FUNDS
Share Capital
Reserves
Total Shareholders Funds
Minority Interest
Long Term Debt
Short Term Debt
Total Debt
Deferred Taxes
Long Term Provisions &
Others
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Net Block
CWIP
Investments
LT Loans & Advances
Inventories
Debtors
Other Current Assets
Cash & equivalents
Total Current Assets
Creditors
Other Current Liabilities &
Provns
Total Current Liabilities
Net Current Assets
TOTAL APPLICATION OF
FUNDS
FY14
FY15
FY16E
FY17E
FY18E
1,254
35,192
36,446
117
16,323
7,614
23,936
(1,532)
1,254
36,906
38,159
203
19,039
8,399
27,438
(1,110)
1,254
35,323
36,576
173
22,000
6,000
28,000
(320)
1,254
33,799
35,052
153
22,000
6,000
28,000
(320)
1,254
35,586
36,840
163
22,000
8,500
30,500
(320)
731
655
528
461
487
59,698
65,345
64,957
63,346
67,670
32,408
2,184
2,780
499
16,714
35,913
7,893
8,358
68,878
43,717
28,634
1,267
2,806
237
14,552
37,318
13,485
8,501
73,856
37,985
27,198
3,600
4,806
434
12,572
31,919
12,616
5,705
62,812
31,096
28,000
3,750
6,806
232
10,838
24,489
6,738
10,476
52,542
25,542
28,784
4,000
8,806
258
11,479
27,037
7,484
9,560
55,561
27,160
3,333
3,470
2,797
2,442
2,579
47,050
21,828
41,455
32,401
33,893
28,919
27,984
24,558
29,739
25,822
59,699
65,345
64,957
63,346
67,670
Page | 4
Cash Flow
(Rs mn)
Reported PBT
Non-operating & EO items
Interest
Depreciation
Working capital change
Tax Paid
Other operating items
OPERATING CASH FLOW (a)
Capex
Free Cash Flow
Investments
Non-operating Income
INVESTING CASH FLOW (b)
Debt Issuance/(Repaid)
Interest
FCFE
Share Capital Issuance
Minority Interest
Dividend
FINANCING CASH FLOW (c)
NET CASH FLOW (a+b+c)
Closing CF as per AR
Key Ratios
FY14
4,947
(2,115)
1,366
2,621
(2,513)
(2,411)
4,692
6,588
(2,620)
3,968
1,242
400
(978)
274
(1,337)
2,905
(1,335)
(8)
(888)
(3,294)
2,316
8,150
FY15
4,283
(2,397)
1,443
2,620
(9,983)
(2,468)
(3,560)
(10,060)
1,310
(8,750)
2,578
396
4,284
6,744
(1,430)
(3,436)
100
(895)
4,520
(1,257)
6,893
FY16E
2,939
(3,612)
1,765
2,703
488
(2,223)
221
2,281
(3,600)
(1,319)
(1,525)
1,992
(3,133)
562
(1,765)
(2,523)
(30)
(733)
(1,967)
(2,819)
5,682
FY17E
576
(1,938)
1,838
2,798
9,335
(1,417)
(464)
10,726
(3,750)
6,976
(1,530)
1,938
(3,342)
(1,838)
5,139
(20)
(733)
(2,591)
4,794
10,499
FY18E
4,210
(2,043)
1,920
2,966
(2,206)
(1,709)
(424)
2,715
(4,000)
(1,285)
(1,530)
2,043
(3,487)
2,500
(1,920)
(705)
10
(733)
(144)
(916)
9,560
PROFITABILITY %
GPM
EBITDA margin
APAT margin
RoE
Core RoCE
RoCE
EFFICIENCY
Tax rate %
Fixed Asset Turnover (x)
Inventory (days)
Debtors (days)
Payables (days)
Cash Conversion Cycle (days)
Debt/EBITDA (x)
Net D/E (x)
Interest Coverage (x)
PER SHARE DATA (Rs)
EPS
CEPS
Dividend
Book Value
VALUATION
P/E
P/BV
EV/EBITDA
EV/Revenues
OCF/EV (%)
FCF/EV (%)
FCFE/MCAP (%)
FY14
FY15
FY16E
FY17E
FY18E
32.2
5.1
1.8
6.8
4.6
5.8
32.0
4.2
1.0
3.7
3.0
3.4
33.1
3.2
(0.7)
(2.3)
0.5
(0.7)
35.5
3.4
(0.8)
(2.2)
(1.2)
(5.4)
35.7
6.7
2.4
7.0
4.4
5.6
47.7
0.3
45.3
97.2
118.4
24.1
3.5
0.4
3.1
51.8
0.3
37.9
97.2
98.9
36.2
4.6
0.5
2.3
75.7
0.2
38.8
98.5
96.0
41.3
7.4
0.6
0.6
246.0
0.2
41.6
93.9
97.9
37.5
8.6
0.5
0.3
40.6
0.2
39.9
93.9
94.4
39.5
4.3
0.6
2.1
3.9
8.1
21.1
58.2
2.2
6.4
24.1
60.9
(1.4)
3.0
19.3
58.4
(1.3)
3.2
24.3
55.9
4.0
8.8
29.2
58.8
39.0
2.6
16.2
0.8
5.9
3.6
3.1
69.6
2.5
19.2
0.8
(8.8)
(7.7)
(3.6)
(112.0)
2.6
31.0
1.0
1.9
(1.1)
(2.7)
(120.3)
2.7
34.4
1.2
9.5
6.2
5.4
37.7
2.6
16.5
1.1
2.3
(1.1)
(0.7)
Page | 5
RECOMMENDATION HISTORY
Crompton
Date
29-May-15
3-Feb-16
10-Feb-16
9-Mar-16
TP
220
200
180
CMP
168
131
129
152
Reco
BUY
BUY
BUY
BUY
Target
206
200
174
178
160
140
120
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
100
Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period
Page | 6
HDFC securities
Institutional Equities
Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,
Senapati Bapat Marg, Lower Parel, Mumbai - 400 013
Board : +91-22-6171 7330 www.hdfcsec.com
Page | 7