Key Takeaway: Crompton’s FY21 AR details its 5-point strategy, new launches, multiple initiatives (cost control, distribution) and growth catalysts. FY21 saw cost saving worth Rs 1.53bn. CROMPTON further streamlined its Go-To-Market, and doubled retailers reach. 80% of its secondary sales can now be tracked, New launches are largely premium in nature, which could drive the next leg of growth. Factoring upside from these, we raise FY22-24e EPS by +4%. Retain Buy; PT of Rs 530.
Strategy; Outlook: CROMPTON has delivered superior execution, with FY19-21 EPS CAGR at +23%, outpacing peers. The company is embarking on a 5-dimensional growth strategy for strengthening its Brand, Portfolio, Go-To-Market Reach, Operational and Organizational focus. Also, its cost control program ‘Project Unnati’ has garnered savings of Rs 1.53bn in FY21 via product design optimization, in-house manufacturing and commercial negotiations. In FY22, CROMPTON envisages cost saving worth Rs 1.75bn. Over FY20-24e, we expect CROMPTON to post +14% PAT CAGR, aided by +230bps margin expansion, driven by premiumization, cost control, potential shr gains, launches, GTM and a sturdy B/S.
Catalysts: CROMPTON’s key products are Fans, Pumps, Appliances and Lighting. 1) Fans demand is likely to be underpinned by Rural electrification and boost in Housing. PMAY scheme aims to build 20 mn affordable houses in urban by 2022. 2) BEE could enforce new energy labeling norms from Jan’22 – this is intended to reduce energy consumption of appliances and lower its carbon footprint, without diminishing service quality. This could boost demand for energy-efficient products. 3) Govt’s aim of providing drinking water to all by 2024 could drive Pumps demand.
Launches: FY21 saw many new launches across categories, mainly premium, aiding margins. Buy: CROMPTON’s FY21 AR details its multiple launches (mainly premium) and various initiatives, eg, cost control, distribution etc. Factoring upside from these, we raise FY22-24e EPS by +4%. Reiterate Buy with revised PT of Rs 530 (vs Rs 490). Retain target PE at 45x. Key Risks: Demand slowdown, RM volatility and pricing pressures.