Broker’s Call: Crompton Greaves CE (Neutral)

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Target: INR 302

CMP: 288 rupees

We interact with Crompton Dealers/distributors point to the company’s near-term growth issues amid slowing demand for fans and lighting. For the masses, the expected drop in demand in April and May caused higher-than-usual inventories.

Traders believe that the inventory will be settled by the end of July to mid-August. In the case of lighting, demand is muted and is expected to remain so for the foreseeable future. Traders are pinning their hopes on the holiday season to revive demand. Small appliances and new products such as large embedded appliances are likely to generate double-digit growth, albeit with a lower contribution to total revenue.

The butterfly shift isn’t going to be anytime soon, given the declining demand for inferior kitchen appliances in certain product categories.

Margins are likely to decline at lower levels due to higher R&D and marketing/distribution costs, as well as increased personnel costs to stem recent tapering. We remain cautious and downgrade the stock to Neutral with a PT of $302 due to limited upside from current levels. We continue to rate the stock at 27x EPS for FY ’25 and believe there is likely to be an opportunity for the stock to enter at lower levels.