Crompton Greaves falls 3% after Q3 margins disappoint
“The dip in net profit can be attributed to factors like Hypercity, which is still registering losses, and expenditure on new stores opened during the quarter” said Govind Shrikhande, Managing Director, Shoppers Stop Ltd (SSL).
Stocks of Crompton Greaves traded 3% lower on the bourses today after the company reported sharp fall in margins in the third quarter ending December 2011. The Sensex was down 0.3% at 1006 hours.
The company reported its numbers yesterday. While sales jumped 26.3% to Rs 3,028 crore against Rs 2,397 crore (year-on-year), profit after tax (PAT) plunged 66.7% to Rs 77.1 crore against Rs 232.8 crore YoY on the back of large losses in the European business.
Consolidated earnings before interest and tax (EBITDA) margins grew by 6% against estimates of 9%. Margins declined by 816 basis points YoY.
Crompton Greaves is engaged in design, manufacturing, and marketing of products related to power generation, transmission, and distribution.
Brokerage firm CLSA maintained underperform on the stock with a target of 120.
CLSA’s view:
No visible saving in employee costs & overheads
Crompton would miss its guidance by a significant margin in FY12
Likely to see revision of 15-20% cut to FY12 earnings per share
FY13-14 EPS are also likely to be cut sharply
Result review:
Europe business:
EBITDA margins came in at 0.5% much below estimates of 5.8%
Net loss stood at Rs 50.2 crore against estimates of net profit Rs 20 crore
Company had reported net loss in first quarter of this fiscal too
In euro terms, revenues grew ~25%
Domestic business:
EBITDA margins at 10.8% against estimates of 11.5%, declined significantly by 552 basis points YoY
Power revenue grew 30%, EBIT margins declined 904 basis points YoY to 10.7%
Industry revenue grew 11%, EBIT Margin declined 363 basis points YoY to 14.6%
Consumer revenue grew by 6%, EBIT margin fell to 11.8%, down 224 basis points YoY