Crompton Greaves Consumer Electricals Ltd manufactures and markets a wide spectrum of consumer products ranging from fans, light sources, pumps and household appliances such as geysers, mixer grinders, toasters and irons. Crompton has been a market leader in fans, domestic pumps and street lighting for the last more than 20 years.

It has four manufacturing locations in the country across Goa, Vadodara, Ahmednagar and Baddi. Crompton products are available in nearly 100,000 retail points across the country, with the businesses rapidly expanding into new categories. The Consumer division of the company has been the best performing business in the industry, growing by nearly 16% CAGR over the past five years. Crompton customer service and product quality are a benchmark in the industry, with their CFL lamps having the lowest defects in the lighting industry. Crompton’s portfolio of energy-efficient products include five-star rated durable lights, fans, pumps and appliances for home and offices.

The company is continually introducing smarter products like super efficient LED bulbs, water heaters with the lowest standing costs and patented tank designs made from nano-tech based materials. The government’s ambition to achieve rural electrification and provide electrical products with shorter replacement cycles have been the key drivers for companies like Crompton Greaves Consumer. On the other hand, GST, which has facilitated the transition of the business from unorganised entities to organised players like Crompton, has brought a much needed relief to a sector which has borne the brunt of pricing pressure over the years. From being a marginal player in the lighting segment, the company has become the second largest lighting company after Philips.

A distribution push has started showing good results, with LED sales contributing nearly 70% of the lighting segment sales and there is also enough room for a double digit growth rate over the next few years. In the fans segment, Crompton believes headroom growth to accrue in the premium sector and also expanding through innovation products. Crompton has taken various measures in the agri pump sector and hence green shoots are visible, with growth jumping sharply in the quarter gone by. Crompton has reported a 28% increase in its net profit at Rs 69.50 crore for the quarter ended December 2017 against a net profit of Rs 54.35 crore for the same period of the previous fiscal.

The total income during the current quarter stood at Rs 944.81 crore, as against Rs 909.64 crore for the year ago period. The company seems to be settling in very nicely post the DeMo and GST implementation teething issues. Many large brokerages and analysts are bullish on the Crompton scrip and have put out research reports favouring the stock to outperform in the next few quarters. Even a few large mutual fund managers have recently added the stock onto their portfolio schemes. The Crompton stock, currently quoting at Rs 230, can give a 30% price appreciation in the next one-year time horizon.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

 

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