“Accelerated cost savings program, through efficiency in purchase and operations, is reflected in our improved margins in the lighting segment,” said Shantanu Khosla, managing director, CG Consumer. Analysts at Motilal Oswal Securities say their channel checks suggest Crompton took price hikes in Q3, both in lighting and fans. This is likely to have pulled up its profitability.
Overall, the company’s sales at Rs 1,030 crore, up 10 per cent YoY, were a tad lower than Bloomberg’s estimates of Rs 1,045 crore. However, the net profit at Rs 79.7 crore (up 14.6 per cent) met the estimates.
The Q3 performance has provided confidence to the analysts, who see the recovery in margins to continue. In the durables segment, the performance is expected to be led by pumps, geysers and fans.
In the LED space, while competition may be high, limited penetration (slightly more than a third) means the big growth opportunity remains intact. A smart LED street light order from the Odisha government, expected to be completed in 5 months, with margins in the teens, should boost performance in the coming quarters, feel analysts.
After results, Arafat Saiyed at Reliance Securities maintains his positive stance on the firm. So does Motilal Oswal Securities, which sees potential gains of 25 per cent in the stock. Edelweiss expects CG to post a 13 per cent annual sales growth in FY18-21, driven by new launches and market expansion.