Crompton Greaves - 3QFY13 Results Update - Motilal Oswal

Crompton Greaves' (CRG) 3QFY13 operating performance was below expectations, largely impacted by losses in overseas business, constrained business environment in domestic power segment and restructuring costs.

Consolidated revenue at INR29.7b, declined 1.9% YoY, in line with our estimate. Reported EBITDA margin was 0.1%. Consolidated net loss was INR1.9b (PAT of INR1b in standalone business and losses of INR2.9b in subsidiaries).

3QFY13 results include non-recurring restructuring costs of INR2.04b (INR1.2b of employee retrenchment costs and INR830m of other incidental costs) in Belgium. Adjusted for these, consolidated EBITDA margin was 2.9% below our estimate of 4.7%. Adjusted net profit was INR149m (Standalone: net profit of INR1b; Overseas: net loss of INR924m) v/s our estimate of INR370m.

Consolidated order intake declined 34% YoY (Standalone: down 19% YoY; Overseas: down 45% YoY) from a very high base last year. Order intake in overseas business was also lower on account of CRG's deliberate strategy to focus on execution (consolidated order book up 35% YoY) at this phase of the ongoing restructuring program, as factories are already running at full capacity. Order intake in the domestic power segment was robust at INR7.5b, in line with the quarterly run rate and largely driven by pick-up in SEB orders.

Restructuring in Belgium has been concluded and all restructuring costs have been fully provided for. In Hungary, FY13 production is expected at 9,000MVA (v/s the usual 3,000-3,500MVA per year). The immediate focus areas are delivery pick-up by customers (EUR17m revenue target in 4QFY13).

We have cut our FY13/14 EPS estimates by 3/4%, led by lower margin expectations in the domestic power business. Maintain Buy, with a target of INR150 (up from INR131 with rollover to FY15E).

Source : Equity Bulls

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