How broking firms rate Crompton Greaves Q4 results

Engineering major Crompton Greaves  fourth quarter consolidated net profit plunged 75 percent to Rs 25.3 crore from Rs 100 crore, a year ago on account of higher expenses. The company posted 10 percent growth in its net sales at Rs 3387 crore compared to Rs 3087 crore in the same quarter last fiscal.

The earnings before interest, tax, depreciation and amortization (EBIDTA) also more than halved to Rs 77.9 crore from Rs 213 crore in the previous fiscal. EBITDA margins were also down by 460 basis points to 2.3 percent from 6.9 percent earlier.

Brokerage house Bank of America Merrill Lynch has maintained its ‘underperform’ rating on the stock with a price target of Rs 104 citing weak fourth quarter has left a lot unanswered for FY14. The firm sees no visibility on sustainable turnaround in international operations with the current product mix. BoAML has also cut its FY14 and FY15 earnings estimates by 11 percent.

Meanwhile, brokerage house Macquarie has maintained its ‘underperform’ rating on the stock with a price target of Rs 83 on concerns of continuous decline in its standalone margins. It has cut its FY14E EPS by 14 percent based on a lower margin assumption for the domestic business. The turnaround in subsidiaries also remains uncertain and this will continue to be a serious overhang on the stock.

UBS too has ‘sell’ rating on Crompton Greaves with a price target of Rs 90 as the broking firm believes the business environment for the company continues to remain very challenging. UBS feels in absence of near-term triggers, the stock may continue to underperform.

However, Morgan Stanley remains bullish on the stock and has maintained its ‘overweight’ rating citing strong order book position. Morgan Stanley expects revenue growth to remain comfortable and margins in the international power segment to recover.

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