Crompton Consumer Electricals Ltd.'s ambitious growth plans drew a mixed brokerage response, with JPMorgan cutting its target price to Rs 290 from Rs 307 despite the company's guidance for 13-14% revenue CAGR through FY29. Jefferies and Citi retained their positive ratings, pointing to premiumisation, new businesses and distribution expansion as drivers of the company's next phase of growth.
Crompton aims to double revenue by FY31 and expects EBITDA margins to exceed 12% by then. The company also plans to expand into wires and solar rooftop, with new businesses targeted to contribute at least 20% of turnover. JPMorgan, however, said execution will be key to delivering on the ambitious targets.
The company expects its total addressable market to expand to Rs 2 lakh crore with the addition of wires, while the solar rooftop market is expected to double by FY29.
Crompton Consumer Investor Day Highlights:
- Revenue CAGR targeted at 13-14% through FY29.
- Exit EBITDA margin targeted at 11-12% by FY29.
- Revenue expected to double by FY31.
- EBITDA margin expected to exceed 12% by FY31.
- New businesses targeted to contribute at least 20% of turnover.
- Total addressable market expected to expand to Rs 2 lakh crore with wires.
- Solar rooftop market expected to double by FY29.
- Premiumisation and BLDC adoption expected to support the fans business.
- Rs 350 crore greenfield plant construction is expected to begin in Q4 FY27.
Crompton said premiumisation in fans, expansion into wires and solar rooftop and a reduction in the contribution of weather-dependent categories are expected to support the business. The company also expects shorter replacement cycles and higher adoption of BLDC fans to support the fans category.
The Rs 350 crore greenfield plant, with construction scheduled to begin in Q4 FY27, is expected to support capacity expansion and margin improvement.
Here's what brokerages are saying after Crompton Consumer's investor day:
JPMorgan
- Maintained 'Neutral'; Target Price Cut To Rs 290 From Rs 307
- Called Crompton's growth aspirations ambitious, with execution key to delivering the targets.
- Identified premiumisation, innovation and distribution expansion as key areas of focus.
- Sees the Butterfly business scaling profitable growth.
- Expects new ventures to expand the total addressable market and reduce seasonality.
- Cut the target price to Rs 290 from Rs 307.
Jefferies
- Maintained 'Buy'; Target Price At Rs 330
- Said Crompton is targeting a transformation in its growth profile.
- Noted the company's goal of doubling sales over five years, with operating margins reaching 11-12%.
- Premium fans now account for 25% of the mix.
- Identified solar and wires as new growth categories.
- Noted average price increases of 14% across key categories over the past year.
- Expects an 18% FY26-FY29 estimated EPS CAGR, compared with 1% during FY20-FY26.
Citi
- Maintained 'Buy'; Target Price At Rs 400
- Said Crompton is becoming less seasonal and more scalable.
- Expects the company to deliver 15% CAGR over FY26-FY31 versus 10.7% over FY22-FY26.
- Expects profit growth to outpace revenue growth.
- Expects new businesses, including wires and solar rooftop, to contribute 20% of FY31 revenue.
- Said the addressable market has doubled.
- Noted that weather-dependent categories have declined to 20% of the addressable market from 45%.
- Said the de-risking of the business model, Butterfly turnaround and new growth initiatives provide better visibility for future earnings.
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