Crompton Greaves Consumer Electricals Ltd Sector-Electricals BUYING RANGE: TARGET: 260 POTENTIAL UPSIDE:~21%

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1 RECOMMENDATION: BUY BUYING RANGE: TARGET: 260 POTENTIAL UPSIDE:~21% Rational Crompton has been the market leader in fans, domestic pumps and street lighting for over 20 years. Its products are available in nearly 150,000 retail points across the country. Last year the sales crossed 10M fans, the largest in the world. The Crompton Consumer business has been the best performing business in the industry growing 16% percent CAGR over the past 5 years. The Company has kept the consumer at the heart of the INNOVATION engine. Electric Consumer Durables segment showed strong growth of close to 15%, all our key product lines in this segment have shown doubledigit growth, the real drivers of ECD were fans, pumps and also towards the backend of the quarter, geysers. The stock is currently trades at x FY19e EPS of 5.86 & 33.24x FY-20e EPS of 6.56 with target price of Rs 260. Outlook Net Sales at Rs 1, crore in September 2018 up 8.14% from Rs crore in September Company exports to more than 20 countries, with higher focus on Indian sub-continent, Middle east and Africa. CROMPTON is liked for its strong product portfolio, established brands, market leadership, wide distribution network and a robust ROE/RoCE profile. It had started a go-to-market initiative for reach expansion as a pilot in South India. On successful implementation, this initiative was extended pan-india. Company maintains our strong lead in residential pumps market, especially in the mini pump series. Agricultural pumps market provides a strong potential for growth and hence remains our focus segment in product development and channel expansion. Crompton was the first company to introduce Anti-dust fans in the market around one and half years ago. The company witnessed good success since its launch with sales worth Rs 200 crores from the Anti-dust fan, making it the single largest selling innovation in the market. Premium fans range range witnessed a growth of over 20 percent on account of the expansion in the distribution network and higher advertisement expenditure. Pump segment also continues to do well especially behind the ongoing initiative of crest mini where company clearly are growing its business faster than competition, the volume growth was strong at 25% in the Q2FY-19.

2 Stock Informations SHAREHOLDING PATTERN PARTICULAR PARTICULAR HOLDING % NSE Code CROMPTON Promoter BSE Code FII 4.49 Equity Cap(Rs DII Cr) Market Cap(Rs 13, Others(Public) Cr) O/S Shares(Cr) Week Range 190/295 Face Value Rs. 2 CMP Rs. 218 Key Financial Informations (Rs Cr) Particulars Mar'16A Mar'17A Mar '18 A Mar'19E Mar'20E Net Sales 1, , , , , EBITDA PAT EPS(Rs.) Price(Rs.) P/E Quarterly Informations (Rs. Cr) Particulars Q2FY19 Q2FY18 YoY(%) Q1FY19 QoQ (%) Total Revenue 1, , EBITDA PBT PAT No. of Shares(Cr) Adjusted EPS

3 Indexed Price Comparison Macroeconomic Factors The macroeconomic scenario of the country remains strong with positive outlook. FDI inflows remain strong, assering our attractive position in global scenario and PMI is also showing positive trend. Combined with some decisive steps for debt overhang resolution in industry, this augurs well for investment climate in the country The engineering sector in India attracts immense interest from foreign players as it enjoys a comparative advantage in terms of manufacturing costs, technology and innovation. The above, coupled with favourable regulatory policies and growth in the manufacturing sector has enabled several foreign players to invest in India. The Foreign Direct Investment (FDI) inflows into India's miscellaneous mechanical and engineering industries during April 2000 to June 2018 stood at around US$ 3.45 billion, as per data released by the Department of Industries Policy and Promotion (DIPP). Government Initiatives : The Indian engineering sector is of strategic importance to the economy owing to its intense integration with other industry segments. The sector has been de-licensed and enjoys 100 per cent FDI. With the aim to boost the manufacturing sector, the government has relaxed the excise duties on factory gate tax, capital goods, consumer durables and vehicles.

4 Company s Segment Opportunities & performances Fan: Fans installation is driven by construction sector growth and Electrifications reach, with latter being more relevant for the economy segment of the market. While construction sector growth remains low, implementation of RERA and incentive schemes like Pradhan Mantri Awas Yojna will address this gap. Additionally, move to premium segment & energy efficiency are emerging as important value drivers in this market. Fans sales have a seasonal pattern, with higher sales in summer months. For the year ended 31st March 2018, segment sales(electrical Consumer Durables) was Rs 2, crore and EBIT of Rs crore. Pumps: Agricultural pumps growth is strongly linked with rural income levels, monsoon conditions and electrification reach. Govt programs on energy efficient & solar pumps for irrigation are other important factor for driving growth. Water Heaters: The drivers for these products are urban household income levels whereas construction activity is key for water heaters. Move towards organised sector also has a significant bearing on the market. Premiumisation remains an important value driver for this category. Lighting: Street lighting and Commercial lighting sector is seeing a move towards different models of buying. One emerging trend is ESCo model, where the seller will invest in installation at site and earn by sharing in the resulting energy savings, under BOT paradigm. While this provides opportunity for quality demonstration and higher customer engagement, full risk profile of this model will be mapped going forward. Also, with central budget allocation of capital towards energy efficiency, the purchase for various local bodies is being pooled and standardized, bridging viability gap for various local bodies. For the year ended 31st March 2018, segment sales were Rs.1, crore and EBIT of Rs crore. Company s Opportunities Improved macroeconomic outlook: GST has now stabilized across value chain for the most industries & the business structuring for its full benefits is underway. New Products markets: Energy efficiency, solar power and technology upgrade present many latent markets which can be developed. Changing consumer preference: Rising income levels are driving the demand for more valueadded products across product categories, which can appropriately be addressed by differentiated propositions. Move towards organised segment: Our industry has a significant presence of relatively small

5 scale local players. These players can often provide nimble solutions for specific local requirements, but compromises on quality are too common. As awareness on quality, product performance and life-cycle costs improves, organized segment footprint is improving in most product markets. Capex light buying models in lighting: Street lighting and Commercial lighting sector is seeing a move towards different models of buying. One emerging trend is ESCo model, where the seller will invest in installation at site and earn by sharing in the resulting energy savings, under BOT paradigm. Crompton had set 5 pillars of strategy that will help them to reach the stated objectives: Portfolio Excellence Operational Excellence Brand Excellence Go-to-market Excellence Organisation Excellence

6 Income Statement(Rs. Cr) Particulars 2017A 2018A 2019E 2020E Revenue from operations 3, , , , Expenses a)cost of materials , b)purchase of stock in trade 1, , , , c)change in inventory of finishes goods, WIP & Stock in trade (22.53) (14.79) (16.42) (18.39) d)employee Benefit Cost e)other Expenses Total Expense 3, , , , EBITDA Finance Cost Depreciation & Amortisation Other Income Profit / (Loss) before exceptional & extraordinary items & tax Exceptional Items (2.52) Profit / (Loss) before extraordinary items & tax Extraordinary Items Profit/(Loss) before tax Tax Current Tax (less)mat Credit - - Current tax exp relating to prior year - - Net Current Exp Deferred Tax (11.90) (20.15) (22.47) (25.16) Total Tax Profit/(loss) from continuing operations

7 Balance Sheet(Rs. Cr) Particulars 2017A 2018A 2019E 2020E Equity & Liabilities Shareholder's Fund a) Share Capital b)r & S , , Total SH Fund Non Current Liabilities a)long Term Borrowings b)deferred tax Liabilities(Net) c)other Long Term Liabilities d)long Term Provisions Total Non Current Liabilities Current Liabilities a)short Term Borrowings b)trade Payable c)other Current Liabilities d)short term Provisions Total Current Liabilities , , Total Liabilities 2, , , , ASSETS Non Current Assets a)fixed Assets i)tangible Assets ii)intangible Assets iii)capital Work-In-Progress iv)intangible assets under management v)fixed assets held for sale Total Fixed Assets b)non Current Assets c)deferred Tax (net) d)long term loans & advances e)other NCA Total Non Current Assets , , Current Assets a)current Investments b)inventories c)trade receivables d)cash & Cash Equivalent e)short term loans & advances f)other CA Total Current Assets , , Total Assets , ,463.23

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