Buy Crompton Greaves Ltd – 17th Nov 2009

Buy Crompton Greaves Ltd above Rs. 390/- , Current Market Price : Rs. 395.75/-, Short Term Target : Rs.418 – 427/-, Stop Loss : Rs.379/- : 17th Nov 2009

Crompton Greaves (CG) is part of the US$ 3 bn Avantha Group, a conglomerate with an impressive global footprint.

Since its inception, CG has been synonymous with electricity. In 1875, a Crompton ‘dynamo’ powered the world’s very first electricity-lit house in Colchester, Essex, U.K. CG’s India operations were established in 1937, and since then the company has retained its leadership position in the management and application of electrical energy.

Today, Crompton Greaves is India’s largest private sector enterprise. It has diversified extensively and is engaged in designing, manufacturing and marketing technologically advanced electrical products and services related to power generation, transmission and distribution, besides executing turnkey projects. The company is customer-centric in its focus and is the single largest source for a wide variety of electrical equipments and products.

With several international acquisitions, Crompton Greaves is fast emerging as a first choice global supplier for high quality electrical equipment.

History

The history of Crompton Greaves goes back to 1878 when Col. R.E.B. Crompton founded R.E.B.Crompton & Company. The company merged with F.A Parkinson in the year 1927 to form Crompton Parkinson Ltd., (CPL). Greaves Cotton and Co (GCC) was appointed as their concessionaire in India. In 1937, CPL established, it’s wholly owned Indian subsidiary viz. Crompton Parkinson Works Ltd., in Bombay, along with a sales organization, Greaves Cotton & Crompton Parkinson Ltd., in collaboration with GCC. In the year 1947, with the dawn of Indian independence, the company was taken over by Lala Karamchand Thapar, an eminent Indian industrialist. Crompton Greaves is headquartered in a self-owned landmark building at Worli, Mumbai.

Products & Services Offered

The company is organized into three business groups viz. Power Systems, Industrial Systems, Consumer Products. Nearly, two-thirds of it’s turnover accrues from products lines in which it enjoys a leadership position. Presently, the company is offering wide range of products such as power & industrial transformers, HT circuit breakers, LT & HT motors, DC motors, traction motors, alternators/ generators, railway signaling equipments, lighting products, fans, pumps and public switching, transmission and access products. In addition to offering broad range of products, the company undertakes turnkey projects from concept to commissioning. Apart from this, CG exports it’s products to more than 60 countries worldwide, which includes the emerging South-East Asian and Latin American markets.

Thus, the company addresses all the segments of the power industry from complex industrial solutions to basic household requirements. The fans and lighting businesses acquired “Superbrand” status in January 2004. It is a unique recognition amongst the country’s 134 selected brands by “Superbrands”, UK.

Company Update

The company has come up with good set of numbers in the latest quarter ended September 2009. The growth in Q2 profits can be attributed to the changes in design, valuing engineering and cost reductions in the material cost along with a certain dip in the raw material costs. Major share in revenues was of Consumer products segment which increased at a sharp rate of 24% from the similar period last fiscal. On the contrary power systems segment growth remained muted. The management has shown confidence going forward. The most remarkable aspect of this quarter’s result was the impressive growth of margins across all the segments. The company’s order book stands quite strong at Rs 31 billion on standalone basis and Rs 64 billion on consolidated basis. With the increase in international demand for T&D products in US and Europe, there is a strong growth opportunity for its products. Inspite of the economic slowdown, Crompton Greaves has reported great results quarter after quarter. The company stands efficient in its operations, profit margins and working capital management.

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