BUY

Crompton Greaves (CRG)

Industrials

JUNE 01, 2015

RESULT

Plugging the hole.

"

&

'

&

'

>

"

<

`
f

`
M

"

"

"

&

'

"

"

'

"

Cautious

2017E

2016E
0

"

<

"

2015

'

<

&

12M

3M


'

1M

Price performance (%)

=

Forecasts/Valuations

Shareholding pattern (%)

&

Stock data


<

<

>

>

Industrials

Crompton Greaves

Overseas power business on its way to getting sold

} Investments in the overseas subsidiaries.

`
L

} Timing.

} Rationale.
f

Company targets cleaner structure for remaining B2B businesses

} Rs7 bn loan to overseas business would eventually get transferred to the
consumer business post the demerger.
`
P

} Takes large loss provisions in the quarter to pave the way for a cleaner business.
`
`
`

112

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Crompton Greaves

Industrials

Exhibit 1: Consumer business financials and SOTP-based target price

[

2014
z

2016E

2017E

2018E

2015

Exhibit 2: Broad financial break-up of retained B2B business

[

Sales (Rs mn)

EBIT margin(%)

EBIT (Rs mn)

KOTAK INSTITUTIONAL EQUITIES RESEARCH

113

Industrials

Crompton Greaves

4QFY15 financials marred by several non-recurring, exceptional and clean-up items

`
h

`
D

} `

} `

Key positives for the year

}

`
L

`
B

Key negatives for the year

}

114

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Crompton Greaves

Industrials

Balance sheet: B2B business to have a strong balance sheet by FY2016-end

}

`
`

Exhibit 3: Crompton Greaves -4QFY15 consolidated revenue model (Rs mn)

4QFY15
38,081

Sales

(20.6)

57

qoq
14.2

(54.0)

(50.0)

FY2014
136,315

609.9

1,811

9.0

Key ratios (%)

EBITDA margin


EPS (Rs)
m

KOTAK INSTITUTIONAL EQUITIES RESEARCH

1.4
n

1.3

0.1

4.6

4.6

4.9

4.7

0.6
n

3.9

1,662

1.1

5.0

7,611

6,120

% change
2.8

7,698

6,424

(6.1)

(3.5)

FY2015
140,131

(39.0)

(21.8)

(33.6)

1,766

804

1,522

% change
yoy
0.1

vs est.
(4.0)

2,720

873

3QFY15
33,332

1,880

2,499

1,850

4QFY14
38,061

402

1,658

Net profit

1,469

PBDIT


EBITDA

4QFY15E
39,682

4.5

2.9

2.7

115

Industrials

Crompton Greaves

Exhibit 4: Crompton Greaves - 4QFY15 standalone revenue model (Rs mn)

4QFY15
21,476

Sales


"

'

'

(14.2)


13.1

4,287

5.9


5,185

6,167

6.9

6,533

8.7

FY2014 % change
75,707
3.5

(6.4)

FY2015
78,370

(17.5)

qoq
15.6

1,283

% change
yoy
5.4

vs est.
(2.9)

1,633

1,261

1,213

3QFY15
18,586

1,852

1,371

4QFY14
20,367

1,780

Net profit


1,528

EBITDA
/

&

4QFY15E
22,121

21.0

Key ratios (%)

'

"

"

"

9.1

8.0
!

7.1

EBITDA margin
3

8.8

8.3

8.1

Exhibit 5: Segment-wise standalone revenues and EBIT for Crompton (Rs mn)

4QFY15

4QFY15E

4QFY14

3QFY15

vs est.

% change
yoy

qoq

FY2015

FY2014

% change

Revenues
<

>

<

PBIT
<

>

<

Revenue mix (%)

<

>

<

PBIT margins (%)

<

>

116

<

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Crompton Greaves

Industrials

Exhibit 6: Crompton Greaves, 4QFY15 subsidiaries revenue model (Rs mn)

4QFY15
16,605

Sales
a

(340)

(1,226)

qoq
12.6

NA

FY2015
61,761
g

NA

FY2014
60,608
g

NA

NA
g

(2,624)

(3,374)

(47)

% change
1.9

(109)

NA

NA

NA

(458)

% change
yoy
(6.2)

vs est.
(5.4)

(111)

3QFY15
14,746

28

70

(970)

4QFY14
17,694
g

Net profit
a

(59)

EBITDA

4QFY15E
17,561

NA

Key ratios (%)

z

(0.4)

EBITDA margin

0.2

0.4
g

(0.8)

(0.2)
g

(0.1)

Exhibit 7: Crompton Greaves (overseas), raw material as cost of sales, March fiscal year-ends (%)

KOTAK INSTITUTIONAL EQUITIES RESEARCH

117

Industrials

Crompton Greaves

Exhibit 8: Constant currency analysis of Crompton's subsidiary EBITDA, March fiscal year ends (Rs. mn)

4QFY15
19,969

Sales

EBITDA

4QFY14
17,694

(70)

Growth (%)
Yoy
qoq
12.9
24.1

3QFY15
16,088

28

(121)

(350.4)

FY2015
65,080

(42.0)

Yoy growth
%
7.9

FY2014
60,306

(162)

(47)

247.5

Key ratios (%)

EBITDA margin
n

(0.4)

0.2

(0.8)

-51 bps

41 bps

(0.2)

(0.1)

-18 bps

Strong ordering in domestic helps support related backlog; overseas backlog hit
by currency

118

`
W

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Crompton Greaves

Industrials

Exhibit 9: Quarterly order booking and backlog trend for Crompton's overseas subsidiaries, March fiscal year-ends, 2008-2015

<

>

'

&

'


#
$
#

"







"

&














X
S

T
T

S
S

S
T

j
w

k
m

Exhibit 10: Quarterly order booking and backlog trend for Crompton's standalone power segment, 4QFY09 - 4QFY15


KOTAK INSTITUTIONAL EQUITIES RESEARCH

119

Industrials

Crompton Greaves

Exhibit 11: Crompton Greaves, revised revenue growth and margin assumptions, March fiscal year-ends, 2014-17E (Rs. mn)

2014

New estimates
2016E
2017E

2015

Old estimates
2016E
2017E

% change
2016E
2017E

Standalone power


'

&

&

'

"

&

&

'

"

"

&

&

&

&

"

&

"

&

"

&

&

&

&

'

&

'

&

'

&

'

"

&

"

&

"

&

"

&

&

"

&

'

&

'

&

'

&

Consumer products


"

'

&

"

"

&

"

'

&

"

"

&

"

"

"

"

"

&

"

&

"

"

&

"

"

"

&

&

"

&

Industrial systems


"

"

'

&

"

'

"

"

&

'

"

&

"

"

"

&

"

&

"

"

"

"

&

"

&

"

"

"

"

&

"

&

"

"

&

"

"

"

"

&

"

'

&

&

'

"

Standalone (total)


'

&

'

&

&

&

&

&

&

&

"

&

&

&

"

"

"

&

"

&

"

&

'

"

&

&

'

&

'

&

'

Overseas


<

"

&

'

"

'

"

"

>

120

&

&

"

&

&

&

&

&

&

&

&

&

"

"

&

&

&

&

'

&

'

&

'

(7.5)

(10.5)

(7.9)

(17.0)

11,725


154,170

'

&

&

"

9,154

&

'

140,967
%

&

"

"

9,730
"

138,050


'

&

&

&

'

8,427
"

"

130,445
/

"

"

"

'

'

"

'

6,424

"

140,131
!

"

"

"

4.1

"

"

&

"

&

&

&

EPS (Rs)
0

&

134,806

"

&

"

"

'

6,820

"

EBITDA
:

"

Consolidated
Revenues
(

'

'

"

&

2.9

"

&

6.3

'

"

"

&

"

9.4
!

&

7.7
"

"

&

"

11.7


&

"

&

'

(17.5)

"

&

'

(19.8)

"

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Crompton Greaves

Industrials

Exhibit 12: Estimates build in steady growth in standalone business and overseas margin of 4% in FY2017E
x

136,315

PBT
c

75,707
G

9,730

6,447

1,811
2.9

78,370

4,287
6.8

5,185
8.3

7,550

6,869
G

9,105
G

61,761

(47)
O

1,364

(1,643)

877
G

(3,374)
(5.4)

45,149
G

(2,838)

(2,626)
(4.2)

2017E

45,713

(109)

(2,179)

6,647
10.6

5,906
9.4

8,090
G

60,306
G

8,366

Subsidiaries
2015
2016E

2014

92,900

2017E

84,732

6,533

6,200
H

5,861
9.4

6,167

8,469

3,963
6.3

Standalone
2015
2016E

2014

138,050

8,427

4,031

1,662
2.7

2017E

130,445

6,424

4,023

Net profit
EPS

140,131

6,120

EBITDA
_

Consolidated
2015
2016E

2014
Financials (Rs mn)
Net sales

(636)

(1,943)
(3.1)

(786)
(1.3)

Key ratios (%)

T

EBITDA margin

4.5

4.6

KOTAK INSTITUTIONAL EQUITIES RESEARCH

6.5

7.0
R

8.1

8.3

(0.2)

(0.1)
G

9.0

8.9
P

1.9

3.0

121

Industrials

Crompton Greaves

Exhibit 13: Consolidated financials of Crompton Greaves, March fiscal year-ends, 2009-17E (Rs. mn)
2010
Income statement
Operating income

91,409

EBITDA

8,241
12.8

9,191
14.3

3,676
5.7

838
1.3

2,587
4.1

138,050

8,427

2017E

130,445

6,424

2016E

140,131

6,820

2015

134,806

3,832

2014

120,944

8,036

2013

112,486

13,438

Net profits
EPS (Rs)

2012

100,051

12,770

2011

1,811
2.9

9,730

3,963
6.3

5,861
9.4

Balance sheet

30,095

Total application of funds

61,248

63,627

61,553

60,523

63,627

56,046

60,523

46,666

56,046

37,607

46,666

37,607

30,095

Total sources of funds

61,553

61,248

Free cash flow

Cash (used) / realised in investing activities

Free cash flow

9,442

Net cashflow from operating activites

(5,751)
4,812

10,563

(7,382)
(1,777)

5,605

(4,623)
(490)

(11,367)
(6,918)

4,133

4,449

(978)
2,218

3,195

136
(1,321)

(1,271)

6,878

(40)
5,378

(303)
4,050

Ratios

122

KOTAK INSTITUTIONAL EQUITIES RESEARCH