Crompton Greaves' restructuring process has started to pay off in profit with most European facilities. Although a likely delay in the net profit breakeven for overseas businesses will result in a lower than earlier anticipated FY14 EPS, the company believes stronger outlook for FY15 will support valuations.
The second quarter of FY14 loss of INR 750 million (approx. $ 12 million) is higher by INR 110 million (approx. $ 1.8 million) due to currency translation. In Europe, the company incurred loss of € 9.3million, which is similar to the first quarter. There are also $ 10 million losses in the US and Canadian facilities.
Crompton Greaves reported standalone 7.7 % revenue growth, while profits grew 11.8 % to INR 2.59 billion ($ 42 million) on the back of strong recovery in the second quarter.
The company is a leading player in the consumer durables space that developed and launched energy efficient key products - fans and lighting – which grew at a strong 23% and 38% YoY, respectively. Consumer segment margins were maintained at approximately 11 -12%.
In FY14, consolidated earnings are expected to recover to INR 3.4 billion (approx. $ 55 million) from driven by an overseas recovery. We expect revenue growth of 10% and profit growth of 90% in FY15.
Crompton Greaves maintains that the long-term positive outlook is very likely.
Source: Equity Bulls