Crompton Greaves shares tank after Q2 net profit plunges 64%

Crompton Greaves shares tank after Q2 net profit plunges 64%

Shares in electrical power equipment maker Crompton Greaves plunged on Monday on the back of disappointing second quarter earnings. Crompton Greaves reported an 8 per cent year-on-year rise in sales at Rs 2,924 crore, but net profit fell 64 per cent to Rs. 42 crore from a year ago.

The biggest disappointment was margins, which rose at 4.7 per cent against expectation of 6.3 per cent.

Crompton shares traded 8 per cent lower at Rs 113.45 on the BSE, underperforming the broader BSE capital goods index, which rose 0.30 per cent in early trade.

Crompton Greaves' standalone operations were better than expectations with margins in power & industrials expanding for the first time in six quarters. However, its international business made losses for the fourth straight quarter.

The company reported a rise in working capital and debt, which increased to Rs 1,650 crore in the September quarter from Rs 990 crore in March 2012.

Crompton Greaves also cut its revenue guidance to 8 per cent from 12-14 per cent earlier, while margins are expected at 5 per cent from 8 per cent earlier.

Global brokerage major Bank of America Merrill Lynch downgraded Crompton to "sell" with a target of Rs 110. The company has seen poor execution and collateral damage in Q2, it said.

Credit Suisse has an "underperform" rating with a target of Rs 92. It cut FY13/14 Earnings Per Share (EPS) estimate by 39 per cent and 11 per cent respectively.

Morgan Stanley also has an "underperform" rating with a target of Rs 108. Margin challenges for the company persist. Morgan said.