Nomura maintained a 'Buy' rating on Crompton Greaves Consumer Electricals but lowered its target price to Rs 292 due to margin pressures. While the company reported an 18% revenue growth in Q2 FY27, persistent commodity costs have prompted the brokerage to trim earnings forecasts and valuation multiples.
Nomura has maintained its 'Buy' stance on Crompton Greaves Consumer Electricals but lowered the target price to Rs 292 per share. This adjustment comes as the brokerage updates its valuation outlook for the company, citing pressure on profit margins despite strong revenue growth in the second quarter of fiscal year 2027.
The company delivered revenue of Rs 22.6 billion for the quarter, an 18% increase compared to the same period last year. Operating profit, or EBITDA, grew 24% to Rs 2 billion, resulting in a 9% margin. However, the brokerage pointed out that profitability was impacted by commodity cost sensitivities, which have remained a challenge despite strategic price increases.
A key area for investors is the variance in performance between business segments. The Electrical Consumer Durables segment saw EBIT margins fall to 11.6%, which missed some analyst estimates. Conversely, the lighting segment showed better performance with a 12.9% margin. To counter rising costs, the company implemented price hikes of 15% to 16% year-to-date, successfully passing on about 80% of elevated input costs to consumers.
Nomura has revised its financial projections, slightly reducing earnings per share estimates for the coming years to account for these ongoing margin sensitivities. Consequently, the brokerage adjusted the valuation multiple assigned to the stock from 28 times to 25 times. Despite this, the long-term outlook focuses on expansion, with emerging business units like solar solutions and electrical wires now contributing 10% of total revenue. Additionally, export volumes surged by over 70% from a smaller historical base.
Investors may continue to track whether the company can recover margins in the consumer durables segment and whether input costs stabilize in the coming quarters. While the near-term margin outlook is tighter, the brokerage expects an earnings growth rate of 17% through fiscal year 2029.