Crompton Greaves Limited - Year well begun! - 1QFY14 Results Review - Antique

Crompton Greaves has started FY14, which promises to be the year of turnaround for the company, on an encouraging note. Domestic performance beat expectations with margin improvement in power and consumer businesses, and healthy momentum in order inflows. Losses on overseas operations continued in 1QFY14, but are declining gradually. CG's key overseas facilities, in Belgium and Hungary, are EBIT positive now, though North American (USA and Canada) business continues to incur losses. We believe that the company will show meaningful growth in domestic earnings in FY14, and with some improvement in Canadian operations, overseas business should break even. In AGM held yesterday, Chairman also expressed confidence in the outlook for the company.

Valuation and outlook

We maintain our EPS estimates of INR 8.4 and 11.2 for FY14 and FY15 respectively. FY14 earnings will be influenced by timing of effective turnaround in the overseas business. We believe current valuation factors in negatives and gradual recovery in earnings will re-rate the stock. We maintain Buy.

Source : Equity Bulls

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