Results Review

INDIA
CAPITAL GOODS
29 May 2016

BUY

Crompton Greaves

TP: INR 80.00

33.0%

CRG IN

Strong quarter, maintain BUY

CRGs Q4FY16 results were ahead of estimates (adj. standalone PAT at
Rs 932mn) on account of a better-than-expected performance in the
standalone entity. Importantly, EBIT margins in the industrial segment
increased 220bps YoY to 12.6%, which management attributed to increased
efficiency. Management expects to execute the deal with First Reserve by
Oct16, while the power systems business in the UK and US is likely to be
closed over the same period. Our Mar17 TP is Rs 80 (18x FY18E EPS). BUY.
Industrial sector delivers a positive surprise: The key positive in Q4 came from the
industrial segment where standalone EBIT margins increased 220bps YoY to 12.6%,
led higher efficiency. Industrial revenues grew by 12.6%/10.8% YoY for Q4FY16/ FY16
on account of projects in the cement, railways and irrigation sectors. Management
expects some of the process sectors to continue aiding demand for motors.
Power segment still weak: The power segment for the standalone entity was down
13% YoY in the quarter. According to management, this business is likely to revive in
subsequent quarters as orders flow in from Power Grid and other utilities.
Moves to Indian Accounting Std: CRG shifted to Indian Accounting Standard
reporting in the quarter, which has led to a restatement of the previous years
numbers. At the standalone level, this caused PAT to reduce by Rs 1.4bn in FY15 on
account of an increase in depreciation and lower profit on sale of land.
Power deal to close by Oct16: Management intends to close the sale of the power
products business to First Reserve by end-Oct16. We build in losses from the power
systems business in FY17, but do not factor in gains from the probable sale of ZIV.
View: We maintain BUY with a Mar17 TP of Rs 80 (33% upside). Further upsides
can accrue from the sale of ZIV.

REPORT AUTHORS

Misal Singh
+91 22 6766 3466
misal.singh@religare.com

Prashant Tiwari
+91 22 6766 3485
prashant.tiwari@religare.com

PRICE CLOSE (27 May 16)

INR 60.15
MARKET CAP

INR 37.7 bln

USD 562.4 mln
SHARES O/S

626.8 mln
FREE FLOAT

66.0%
3M AVG DAILY VOLUME/VALUE

11.8 mln / USD 12.8 mln

52 WK HIGH

52 WK LOW

INR 70.47

INR 39.25

Financial Highlights
Y/E 31 Mar

FY15A

FY16A

FY17E

FY18E

FY19E

Revenue (INR mln)

55,054

52,721

54,801

55,869

59,062

EBITDA (INR mln)

5,092

3,671

4,708

5,547

6,082

Adjusted net profit (INR mln)

2,663

1,297

2,159

2,824

3,239

Adjusted EPS (INR)

0.4

(6.3)

3.4

4.5

5.2

Adjusted EPS growth (%)

NA

(1786.7)

(154.6)

30.8

14.7

DPS (INR)

0.0

0.0

0.0

0.0

0.0

ROIC (%)

8.8

1.8

3.1

4.7

5.6

Adjusted ROAE (%)

12.4

2.9

4.6

5.7

6.2

160.8

(9.5)

17.5

13.4

11.6

EV/EBITDA (x)

7.4

13.7

9.0

6.5

5.8

P/BV (x)

0.9

0.8

0.8

0.7

0.7

Adjusted P/E (x)

(INR)

160
140
120
100
80
60
40
20
0

Stock Price

Index Price
29,400
24,400
19,400
14,400

Source: Company, Bloomberg, RCML Research

This report has been prepared by Religare Capital Markets Limited or one of its affiliates. For analyst certification and other important disclosures, please refer to the Disclosure and Disclaimer section at the end of
this report. Analysts employed by non-US affiliates are not registered with FINRA regulation and may not be subject to FINRA/NYSE restrictions on communications with covered companies, public appearances, and
trading securities held by a research analyst account.

BUY

Crompton Greaves

TP: INR 80.00

33.0%

CRG IN

Results Review
INDIA
CAPITAL GOODS

Fig 1 - Actual vs. estimates, consolidated

(Rs mn)

Q4FY16

Q4FY16E

Variance (%)

Revenue

16,699

22,763

(26.6)

EBITDA

1,548

473

227.2

9.27

2.08

719 bps

EBITDA margin (%)

Adj. PAT

819

(207)

NM

Adj. EPS (Rs)

1.31

(0.33)

NM

Source: Company, RCML Research

Fig 2 - Quarterly and annual performance, consolidated

(Rs mn)

Q4FY16

Q4FY15

YoY (%)

Q3FY16

QoQ (%)

FY16

FY15

YoY (%)

Total Revenue

16,699

15,749

6.0

12,247

36.3

52,721

55,054

(4.2)

Direct costs

11,653

10,265

13.5

7,840

48.6

35,537

37,062

(4.1)

Employees Cost

1,733

1,705

1.7

1,594

8.8

6,549

6,689

(2.1)

Other expenditure

1,765

787

124.4

1,850

(4.6)

6,964

6,211

12.1

EBITDA

1,548

2,993

(48.3)

964

60.5

3,671

5,092

(27.9)

Depreciation

728

523

39.2

622

17.0

2,558

2,447

4.5

EBIT

820

2,470

(66.8)

342

139.6

1,113

2,645

(57.9)

Interest

240

168

43.1

103

132.8

561

827

(32.2)

Other income

257

123

109.4

108

137.3

863

714

21.0

(189)

(448)

(87)

570

(474)

397

(75)

(1,498)

(1,113)

1,497

PBT

1,045

1,901

(45.1)

(1,237)

(184.4)

873

3,554

(75.4)

Tax expense

(182)

(324)

(43.9)

(65)

177.5

144

(104)

(238.6)

PAT

1,226

2,225

(44.9)

(1,172)

(204.6)

730

3,658

(80.1)

819

2,307

(64.5)

329

149.0

1,868

2,189

(14.7)

RM cost

69.8

65.2

460 bps

64.0

577 bps

67.4

67.3

09 bps

Employee

10.4

10.8

(44 bps)

13.0

(263 bps)

12.4

12.1

27 bps

Other expenses

10.6

5.0

557 bps

15.1

(454 bps)

13.2

11.3

193 bps

EBITDA margin

9.3

19.0

(973 bps)

7.9

140 bps

7.0

9.2

(229 bps)

EBIT margin

4.9

15.7

(1,077 bps)

2.8

212 bps

2.1

4.8

(269 bps)

Other income

1.5

0.8

76 bps

0.9

65 bps

1.6

1.3

34 bps

Tax rate, %

(17.4)

(17.0)

(36 bps)

5.3

(2,266 bps)

16.5

(2.9)

1,939 bps

PAT margin

4.9

14.7

(975 bps)

2.7

222 bps

3.5

4.0

(43 bps)

Exchange gain/(loss)
Exceptional Items gains/(loss)

Adj. PAT
As a % of sales

Source: Company, RCML Research

Fig 3 - Actual vs. estimates, standalone

(Rs mn)

Q4FY16

Q4FY16E

Revenue

11,297

8,985

Variance (%)
25.7

EBITDA

898

954

(5.9)

EBITDA margin (%)

7.95

10.62

(267 bps)

Adj. PAT

932

820

13.7

Adj. EPS (Rs)

1.49

1.31

13.7

Source: Company, RCML Research

29 May 2016

Page 2 of 9

BUY

Crompton Greaves

TP: INR 80.00

33.0%

CRG IN

Results Review
INDIA
CAPITAL GOODS

Fig 4 - Quarterly and annual performance, standalone

(Rs mn)
Total Revenue
Direct costs
Employees Cost
Other expenditure

Q4FY16

Q4FY15

YoY (%)

Q3FY16

QoQ (%)

FY16

FY15

YoY (%)

11,297

11,614

(2.7)

9,887

14.3

39,598

42,302

(6.4)

8,080

8,845

(8.7)

7,189

12.4

28,624

31,183

(8.2)

968

875

10.6

906

6.8

3,720

3,714

0.2

1,351

1,290

4.8

1,224

10.4

4,982

4,750

4.9

EBITDA

898

604

48.7

567

58.3

2,273

2,655

(14.4)

Depreciation

246

209

17.6

288

(14.6)

1,080

1,128

(4.3)

EBIT

652

395

65.1

279

133.5

1,193

1,527

(21.9)

(240)

(119)

101.8

(277)

(13.4)

(1,018)

(216)

371.0

264

265

(0.5)

108

144.0

811

650

24.7

(189)

(448)

(87)

570

(474)

Exceptional Items gains/(loss)

(14,149)

(75)

(926)

(15,087)

1,497

PBT

(12,994)

704

(1,946.0)

(261)

4,876.6

(12,066)

3,890

(410.2)

Interest
Other income
Exchange gain/(loss)

Tax expense
PAT
Adj. PAT

34

(32)

(208.5)

(47)

(173.8)

386

(35)

(1,201.4)

(13,028)

735

(1,871.3)

(215)

5,970.9

(12,452)

3,925

(417.2)

932

362

157.4

624

49.3

3,206

1,954

64.1

71.5

76.2

(464 bps)

72.7

(119 bps)

54.3

56.6

(235 bps)

As a % of sales
RM cost
Employee

8.6

7.5

103 bps

9.2

(60 bps)

7.1

6.7

31 bps

Other expenses

12.0

11.1

86 bps

12.4

(42 bps)

9.4

8.6

82 bps

EBITDA margin

7.9

5.2

275 bps

5.7

221 bps

4.3

4.8

(51 bps)

EBIT margin

5.8

3.4

237 bps

2.8

295 bps

2.3

2.8

(51 bps)

Other income

2.3

2.3

05 bps

1.1

124 bps

1.5

1.2

36 bps

Tax rate (%)

(0.3)

(4.5)

423 bps

17.8

(1,807 bps)

(3.2)

(0.9)

(230 bps)

PAT margin

8.3

3.1

513 bps

6.3

194 bps

6.1

3.5

253 bps

Source: Company, RCML Research

Fig 5 - Segmental results, consolidated

Revenues (Rs mn)

Q4FY15

Q3FY16

Q4FY16

YoY (%)

QoQ (%)

15,797

12,294

16,766

6.1

36.4

Power systems

8,646

5,549

8,798

1.8

58.6

Industrial systems

4,701

4,725

5,255

11.8

11.2

Automation systems

2,428

1,985

2,700

11.2

36.0

EBIT (Rs mn)

3,096

853

1,290

(58.3)

51.2

Power systems

2,472

623

712

(71.2)

14.2

Industrial systems

331

287

433

30.9

51.2

Automation systems

279

(62)

122

(56.1)

(297.7)

EBIT margin (%)

19.6

6.9

7.7

(1,190 bps)

76 bps

Power systems

28.6

11.2

8.1

(2,050 bps)

(314 bps)

7.0

6.1

8.2

120 bps

218 bps

Industrial systems
Automation systems

11.5

(3.1)

4.5

(695 bps)

764 bps

Capital employed (Rs mn)

58,586

55,408

50,773

(13.3)

(8.4)

Power systems

17,367

18,663

18,798

8.2

0.7

9,664

9,356

9,453

(2.2)

1.0

14,163

12,239

12,460

(12.0)

1.8

142

38

271

90.9

614.2

17,251

15,113

9,792

(43.2)

(35.2)

Industrial systems
Automation systems
Others
Unallocable
Source: Company, RCML Research

29 May 2016

Page 3 of 9

BUY

Crompton Greaves

TP: INR 80.00

33.0%

CRG IN

Results Review
INDIA
CAPITAL GOODS

Fig 6 - Segmental results, standalone

Revenues (Rs mn)

Q4FY15

Q3FY16

Q4FY16

YoY (%)

QoQ (%)

11,663

9,916

11,362

(2.6)

14.6

Power systems

7,609

5,712

6,613

(13.1)

15.8

Industrial systems

3,855

4,043

4,433

15.0

9.6

Automation systems

200

161

316

58.2

96.3

1,067

693

1,041

(2.4)

50.3

Power systems

576

316

495

(14.1)

56.6

Industrial systems

401

419

557

39.1

33.2

Automation systems

90

(42)

(11)

(112.4)

NM

EBIT margin (%)

9.1

7.0

9.2

01 bps

218 bps
195 bps

EBIT (Rs mn)

Power systems

7.6

5.5

7.5

(09 bps)

Industrial systems

10.4

10.4

12.6

218 bps

222 bps

Automation systems

45.2

(26.1)

(3.5)

(4,876 bps)

2,251 bps

Capital employed (Rs mn)

53,432

59,421

46,778

(12.5)

(21.3)

Power systems

13,632

12,734

11,201

(17.8)

(12.0)

5,144

4,661

4,630

(10.0)

(0.7)

365

228

182

(50.1)

(20.1)

34,292

41,798

30,764

(10.3)

(26.4)

Industrial systems
Automation systems
Unallocable
Source: Company, RCML Research

Fig 7 - Order inflow trend

India

(Rs bn)
35

Fig 8 - Order book trend

(Rs bn)

Out side India

30

80

20

20
11

10

16
15

18
15

14

11
13

14

17

60

11
2

10
5

Out side India

100

25

15

India

120

12

10

14
8

11

10

Source: Company, RCML Research

11

11

11

15

11

12

10

11

50

53

55

58

61

57

59

56

52

41

42

47

43

40
20

7
42

38

43

40

39

36

37

35

35

35

37

37

36

34

Source: Company, RCML Research

29 May 2016

Page 4 of 9

BUY

Crompton Greaves

TP: INR 80.00

33.0%

CRG IN

Results Review
INDIA
CAPITAL GOODS

Per Share Data

Y/E 31 Mar (INR)

FY15A

FY16A

FY17E

FY18E

FY19E

Reported EPS

0.4

(6.3)

3.4

4.5

5.2

Adjusted EPS

0.4

(6.3)

3.4

4.5

5.2

DPS

0.0

0.0

0.0

0.0

0.0

68.7

73.3

76.8

81.3

86.5

BVPS

Valuation Ratios
Y/E 31 Mar (x)

FY15A

FY16A

FY17E

FY18E

FY19E

EV/Sales

0.7

1.0

0.8

0.6

0.6

EV/EBITDA

7.4

13.7

9.0

6.5

5.8

160.8

(9.5)

17.5

13.4

11.6

0.9

0.8

0.8

0.7

0.7

FY15A

FY16A

FY17E

FY18E

FY19E

EBITDA margin

9.2

7.0

8.6

9.9

10.3

EBIT margin

4.8

2.1

3.7

4.9

5.3

Adjusted profit margin

4.8

2.5

3.9

5.1

5.5

12.4

2.9

4.6

5.7

6.2

8.5

1.7

2.6

3.5

3.9
5.7

Adjusted P/E
P/BV

Financial Ratios
Y/E 31 Mar
Profitability & Return Ratios (%)

Adjusted ROAE
ROCE
YoY Growth (%)
Revenue

NA

(4.2)

3.9

1.9

EBITDA

NA

(27.9)

28.2

17.8

9.7

Adjusted EPS

NA

(1786.7)

(154.6)

30.8

14.7

Invested capital

NA

(13.4)

(12.8)

(9.9)

5.4

Working Capital & Liquidity Ratios

Receivables (days)

102

179

137

135

134

Inventory (days)

64

97

83

107

106

Payables (days)

75

127

102

105

103

Current ratio (x)

1.3

1.5

1.8

1.8

1.8

Quick ratio (x)

0.1

0.1

0.4

0.4

0.3

Gross asset turnover

NA

NA

NA

NA

NA

Total asset turnover

0.9

0.5

0.6

0.6

0.7

Net interest coverage ratio

3.2

2.0

0.0

0.0

0.0

Adjusted debt/equity

0.3

0.1

0.0

0.0

(0.1)

FY15A

FY16A

FY17E

FY18E

FY19E

105.2

91.6

75.0

75.6

75.7

95.7

127.2

142.0

136.5

136.5

Turnover & Leverage Ratios (x)

DuPont Analysis
Y/E 31 Mar (%)
Tax burden (Net income/PBT)
Interest burden (PBT/EBIT)
EBIT margin (EBIT/Revenue)
Asset turnover (Revenue/Avg TA)
Leverage (Avg TA/Avg equities)
Adjusted ROAE

4.8

2.1

3.7

4.9

5.3

46.0

45.9

56.0

64.8

67.2

277.6

258.0

208.1

174.0

167.3

12.4

2.9

4.6

5.7

6.2

29 May 2016

Page 5 of 9

BUY

Crompton Greaves

TP: INR 80.00

33.0%

CRG IN

Results Review
INDIA
CAPITAL GOODS

Income Statement
Y/E 31 Mar (INR mln)

FY15A

FY16A

FY17E

FY18E

FY19E

Total revenue

55,054

52,721

54,801

55,869

59,062

EBITDA

5,092

3,671

4,708

5,547

6,082

EBIT

2,645

1,113

2,028

2,738

3,136

Net interest income/(expenses)

(827)

(561)

144

284

420

714

863

708

716

725

2,531

1,416

2,880

3,737

4,281

104

(144)

(746)

(938)

(1,068)

28

25

25

25

25

2,663

1,297

2,159

2,824

3,239

2,663

1,297

2,159

2,824

3,239

Y/E 31 Mar (INR mln)

FY15A

FY16A

FY17E

FY18E

FY19E

Accounts payables

20,554

13,579

14,296

14,568

15,391

Other current liabilities

25,747

33,448

8,032

8,056

8,289

Provisions

3,211

804

804

804

804

Debt funds

19,345

12,360

10,360

8,360

6,412

Other liabilities

7,664

4,031

4,031

4,031

4,031

Equity capital

1,254

1,254

1,254

1,254

1,254

41,825

44,718

46,877

49,701

52,939

Other income/(expenses)
Exceptional items
EBT
Income taxes
Extraordinary items
Min. int./Inc. from associates
Reported net profit
Adjustments
Adjusted net profit

Balance Sheet

Reserves & surplus

Shareholders' fund

43,078

45,972

48,130

50,954

54,193

119,598

110,193

85,653

86,773

89,119

6,776

7,924

11,799

10,762

9,823

Accounts receivables

30,880

20,882

20,379

20,999

22,267

Inventories

13,001

5,850

10,934

11,314

12,011

Other current assets

21,543

45,483

8,927

9,418

10,023

2,965

2,167

5,126

5,126

5,126

28,711

15,007

15,629

16,294

17,007

Total liabilities and equities

Cash and cash eq.

Investments
Net fixed assets
CWIP
Intangible assets
Deferred tax assets, net

515

142

122

122

122

13,085

11,624

11,624

11,624

11,624
899

1,994

899

899

899

Other assets

129

216

216

216

216

Total assets

119,598

110,193

85,653

86,773

89,119

Cash Flow Statement

Y/E 31 Mar (INR mln)

FY15A

FY16A

FY17E

FY18E

FY19E

Net income + Depreciation

NA

3,855

4,838

5,633

6,185

Interest expenses

NA

561

(144)

(284)

(420)

Non-cash adjustments

NA

Changes in working capital

NA

9,871

(3,854)

(1,195)

(1,516)

Other operating cash flows

NA

10

144

284

420

Cash flow from operations

NA

14,296

984

4,438

4,670

Capital expenditures

NA

15,570

(621)

(665)

(713)

Change in investments

NA

(14,317)

8,171

Other investing cash flows

NA

Cash flow from investing

NA

1,253

7,550

(665)

(713)

Equities issued

NA

Debt raised/repaid

NA

(6,985)

(2,000)

(2,000)

(1,949)

Interest expenses

NA

(561)

144

284

420

Dividends paid

NA

Other financing cash flows

NA

(6,854)

(2,804)

(3,094)

(3,367)

Cash flow from financing

NA

(14,400)

(4,660)

(4,809)

(4,895)

Changes in cash and cash eq

NA

1,148

3,875

(1,037)

(939)

6,776

7,924

11,799

10,762

9,823

Closing cash and cash eq

29 May 2016

Page 6 of 9

RESEARCH TEAM

ANALYST

SECTOR

EMAIL

TELEPHONE

Varun Lohchab
(Head India Research)

Consumer, Strategy

varun.lohchab@religare.com

+91 22 6766 3470

Mihir Jhaveri

Auto, Auto Ancillaries, Cement

mihir.jhaveri@religare.com

+91 22 6766 3459

Siddharth Vora

Auto, Auto Ancillaries, Cement

siddharth.vora@religare.com

+91 22 6766 3435

Misal Singh

Capital Goods, Infrastructure, Utilities

misal.singh@religare.com

+91 22 6766 3466

Prashant Tiwari

Capital Goods, Infrastructure, Utilities

prashant.tiwari@religare.com

+91 22 6766 3485

Manish Poddar

Consumer

manish.poddar@religare.com

+91 22 6766 3468

Premal Kamdar

Consumer

premal.kamdar@religare.com

+91 22 6766 3469

Rohit Ahuja

Energy

ahuja.rohit@religare.com

+91 22 6766 3437

Akshay Mane

Energy

akshay.mane@religare.com

+91 22 6766 3438

Parag Jariwala, CFA

Financials

parag.jariwala@religare.com

+91 22 6766 3442

Vikesh Mehta

Financials

vikesh.mehta@religare.com

+91 22 6766 3474

Rumit Dugar

IT, Telecom, Media

rumit.dugar@religare.com

+91 22 6766 3444

Saumya Shrivastava

IT, Telecom, Media

saumya.shrivastava@religare.com

+91 22 6766 3445

Pritesh Jani

Metals

pritesh.jani@religare.com

+91 22 6766 3467

Arun Baid

Mid-caps

arun.baid@religare.com

+91 22 6766 3446

Praful Bohra

Pharmaceuticals

praful.bohra@religare.com

+91 22 6766 3463

Aarti Rao

Pharmaceuticals

aarti.rao@religare.com

+91 22 6766 3436

Arun Aggarwal

Real Estate

arun.aggarwal@religare.com

+91 22 6766 3440

Jay Shankar

Economics & Strategy

shankar.jay@religare.com

+91 11 3912 5109

Rahul Agrawal

Economics & Strategy

ag.rahul@religare.com

+91 22 6766 3433

29 May 2016

Page 7 of 9

RESEARCH DISCLAIMER

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date of publication of this research report.

29 May 2016

Page 8 of 9

RESEARCH DISCLAIMER

Research analyst or his/her relatives do not have any material conflict of interest at the time of
publication of this report.

RCML may from time to time solicit or perform investment banking services for the company(ies)
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2014.

Digitally signed by KHUNDIA MISAL

SINGH
Date: 2016.05.29 22:35:40 +05'30'

29 May 2016

Page 9 of 9