Crompton Greaves Shares Jump Over 6% After Analyst Call. Here's Why

Shares of Crompton Greaves Consumer Electricals Ltd. soared over 6% to hit a five-month high on Wednesday after the company changed its management structure amid focus on double-digit revenue growth.

During an investors' meeting on Tuesday, the management said the household appliances firm is embarking on its 2.0 journey led by premiumisation, innovation, supply-chain excellence and digital initiatives, according to brokerages.

The company also rolled out a new management structure with five business units and seven functional heads.

Shares of Crompton Greaves jumped as much 6.14% intra-day to Rs 316.35 apiece, highest since March 6. It pared gains to trade 3.62% higher at Rs 308.85 per share compared to a 0.12% rise in the benchmark NSE Nifty 50 as of 11:37 a.m.

The total traded volume so far in the day stood at 8.5 times its 30-day average. The relative strength index was at 62, implying that the stock may be overbought.

Of the 46 analysts tracking Crompton Greaves, 31 maintain a 'buy' rating on the stock, 14 recommend a 'hold' and one indicates a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 6.5%.

• Maintains 'neutral' rating on the stock with a target price of Rs 338.

• View the stock in the fair value zone as it trades at 28.5 times of the price-to-earnings ratio forecasted for FY25.

• Management initiatives and consumption recovery in the industry is expected to drive revenue at a compound annual growth rate of 10% over FY23–26 compared to a 7% CAGR over FY18–23.

• The brokerage says 43% of the total revenue comes from the fans segment, which has seen a 7% CAGR.

• Weak traction in the pumps/lighting segment underlines the importance of execution.

• Competitive intensity in the premium-fan segment is increasing.

• Margin expected to be lower due to investments into various initiatives.

• Maintains 'buy' rating with a target price of Rs 350

• Division of business in multiple units is likely to increase accountability and improve efficiencies.

• Multiple sales teams for different products at ground level will drive sales per store

• Portfolio of premium fans is growing at 15%, while mid- and mass-market fans are growing at less than 5%

• There is potential to premiumise the portfolio under Crompton and Butterfly brands

• There is strong potential to drive offtake through e-commerce channels. Crompton generates Rs 250 crore from e-commerce channel, while Butterfly generates Rs 300 crore from the same platform in spite of lower overall revenue

• Company plans to hike prices of brushless direct current fans by 1.5% in September, while lighting products are expected to see a 7–8% reduction in prices due to competitive pressure

• Maintains 'outperform' rating with a target price of Rs 410

• Expects company to report a 10% revenue and an 18% consolidated earnings CAGR over FY23–26

• Mega trends like increasing urbanisation, rising per-capita income, increasing share of women in the workforce, accelerated electrification and development of affordable housing are key tailwind

• It sees the stock rightly placed in core categories to capitalise on future growth, such as retaining market leadership in fans where growth will come from premiumisation and BLDC fans

• Foray into new segments in the next 12–18 months and a total of three new categories over the next three years to drive growth

• Slowdown in domestic business, high competitive intensity and higher revenue concentration are key risks