Crompton Greaves shares: Nomura sees 45% upside for stock; here's what it says on new CEO

Foreign brokerage Nomura India said despite realignment of its top management, Crompton Greaves Consumer Electricals' may keep focusing on delivering business growth, led by timely product innovation, investment in its brand, pricing actions and increased in-house manufacturing. It has a price target that suggests a potential 45 per cent upside from the prevailing levels.

Nomura India said Crompton Greaves has a good pipeline of innovative products and its execution on some of these areas will be a key monitorable. On Wednesday, the stock stood at Rs 260.05 a piece, up 0.13 per cent. This is against a 11.83 per cent drop on the counter in the previous session.  

Crompton Greaves has changed its leadership positions and reconstituted its board committee. It appointed Promeet Ghosh as the Chief Executive Officer (CEO) and Managing Director (MD) of the company for a period of five years, effective from May 1 until 30 April 2028.

The announcement comes at the backdrop of Mathew Job tendering his resignation as the CEO on 24 April to pursue further career interests.

The company also announced that its current MD, Mr Shantanu Khosla, has been appointed and elevated as the Executive Vice Chairman for a period of one year from May 1 to April 30, 2024. Thereafter, he will take up the position of non-Executive Vice Chairman until 31 December 2025.

Promeet Ghosh has been on Crompton’s board since 2016. Nomura noted that Promeet was significantly involved with Crompton when he initially joined but later, as a director, there were limitations to his role in the company.

"He has diverse experience assessing multiple companies in the consumer durables sector, and his focus now would be on making Crompton’s product portfolio future-ready, streamlining the back-end, emphasising product innovation, etc," Nomura said adding that the company management would put forth some of the strategies in detail in a few months.

Nomura India said the stock is currently factoring in a significant weak outlook (revenue CAGR of 8 per cent, EBIT margin of 10 per cent), which makes risk-reward favorable.

"The stock is currently trading at 20 times FY25F EPS, which we believe is attractive as we expect the company can sustainably grow earnings at 15-20 per cent CAGR beyond FY25F and sustain ROEs of 22-25 per cent. We maintain our Buy rating on the stock," it said while suggesting a target of Rs 377 on the stock.

 

Meanwhile, Nirmal Bang Institutional Equities has tweaked its numbers marginally to reflect a renewed focus on topline growth, offset by margin pressures amid rising commodity costs and the management’s conscious decision to shift focus away from maintaining margins.

"We continue to maintain Buy on Crompton with a target price of Rs 310 against Rs 405 earlier), valuing it at 30 times (vs 35 times earlier) FY25E EPS. Reduction in the multiple largely reflects slower-than-expected integration of the Butterfly portfolio with the Crompton portfolio under the leadership of new management," it said.

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