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Equity Bottom-Up

Crompton Greaves Consumer Electricals / Equity Bottom-Up

Crompton Greaves Consumer Electricals (CROMPTON IN)

<ul><li><a href="https://www.smartkarma.com/entities/24046" target="_blank" data-smartkarma-citation="entities:24046:1">Crompton Greaves Consumer Electricals (CROMPTON IN)</a> defends margins at the expense of growth</li><li><a href="https://www.smartkarma.com/entities/9158" target="_blank" data-smartkarma-citation="entities:9158:1">Havells India Ltd (HAVL IN)</a> defends growth at the expense of margins</li><li>Crompton is more dependent on the wholesale channel than Havells. The wholesale channel is still disrupted by GST and will likely stabilize by end-2QFY18. Havells should grow faster than Crompton till the supply chains stabilize fully.</li><li>Higher share of LEDs in its lighting portfolio has not translated into higher profitability for Crompton unlike Havells.</li><li>All 3 of Crompton’s segments are slow growing and commodity related input cost tailwinds have now turning into headwinds. We reckon any potential acquisition in the appliances segment will be operating margin and PAT dilutive. We expect Crompton’s earnings to grow much slower compared to Bloomberg consensus estimates.</li></ul>

Crompton Greaves Consumer Electricals (CROMPTON IN) defends margins at the expense of growthHavells India Ltd (HAVL IN) defends growth at the expense of marginsCrompton is more dependent on the wholesale channel than Havells. The wholesale channel is still disrupted by GST and will likely stabilize by end-2QFY18. Havells should grow faster than Crompton till the supply chains stabilize fully.Higher share of LEDs in its lighting portfolio has not translated into higher profitability for Crompton unlike Havells.All 3 of Crompton’s segments are slow growing and commodity related input cost tailwinds have now turning into headwinds. We reckon any potential acquisition in the appliances segment will be operating margin and PAT dilutive. We expect Crompton’s earnings to grow much slower compared to Bloomberg consensus estimates.

Crompton Consumer and Havells: Contrasting Strategies and Implications on Growth