Crompton Greaves Consumer Electricals Makes Better-Than-Expected Debut

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Crompton Greaves Consumer Electricals, the demerged arm of Crompton Greaves, made a strong debut on exchanges today, with shares in the company rising to Rs 135.45 in intraday trade. Analysts polled by NDTV Profit expected Crompton Greaves Consumer Electricals to list between Rs 110-120.

In March, Crompton Greaves was demerged into two companies – Crompton Greaves and Crompton Greaves Consumer Electricals. Crompton Greaves runs the power business, including power transmission and associated equipment business, whereas Crompton Greaves Consumer Electricals hold the consumer electrical business.

Crompton Greaves shareholders got one share of Crompton Greaves Consumer Electricals for every one share of Crompton Greaves.

Crompton Greaves Consumer Electricals’ estimated FY17 earnings per share (EPS) is Rs 4.7, which translate to a valuation of 29 times price earnings. Crompton Greaves Consumer Electricals’ peers V-Guard, Bajaj Electricals and Havells trade at 26.5, 16 and 32 times their price earnings.

Analysts expect Crompton Greaves Consumer Electricals’ valuation to improve and match with the valuation of Havells India going ahead.

“Over a period of time, it (Crompton Greaves Consumer Electricals ) should come closer to Havells’ trading multiple. In last five years, there is actually no difference between Havells’ and Crompton Greaves Consumer Electricals’ top-line growth, which means the brand strength of Crompton is extremely good/as good as Havells,” said Inderjeetsingh Bhatia, associate director at Macquarie Capital Securities. (Watch)

“This (Crompton) is a much older brand, around 30-40 years old. Crompton’s return ratios are even slightly better than Havells’ because of the fact that they follow an asset light model compared to Havells. Crompton outsources most of the production, whereas Havells does most of the production in-house to have control over quality,” Mr Bhatia told NDTV Profit.