Home appliance maker Crompton Greaves Consumer Electricals reported better than expected performance in the second quarter (Q2) of 2024-25 (FY25), outperforming peers due to a strong showing in the electrical consumer durables (ECD) segment.
The company’s standalone sales rose by 10.5 per cent, while the ECD segment continued its growth momentum with a 12.5 per cent increase in revenues, driven by volume and pricing gains.
Both the ECD and lighting segments saw growth, but margin improvements were primarily led by the ECD segment.
Within the ECD segment, which accounts for 74 per cent of total revenues, the appliance business delivered robust year-on-year (Y-o-Y) growth of 26 per cent, driven by air coolers, water heaters, room heaters, and mixer grinders.
The management observed that it has secured a leadership position in the mixer grinder business, supported by Butterfly Gandhimathi Appliances’ manufacturing facility.
The proportion of the premium portfolio within large domestic appliances rose by 270 basis points (bps) compared to the same quarter last year.
Channel expansion and new product launches contributed to the growth in the small domestic appliance segment, including mixers and grinders.
Growth in the fan business improved from low single-digit growth in the previous four quarters to 5 per cent in Q2, supported by volume growth and price hikes.
The company aims to boost sales with new products and is focusing on improving in-house manufacturing for brushless direct current (BLDC) fans.
Over the past 12 months, the company implemented a 1.5-2 per cent price hike and does not expect further increases.
In addition to price hikes, margin gains are expected from a higher share of premium and new products.
In the pump segment, the company posted 20 per cent Y-o-Y revenue growth.
The solar pump segment saw gains due to the execution of a Rs 42 crore order, while growth in residential pumps was driven by product launches and premiumisation.
In the solar pump segment, the company has secured Rs 100 crore in orders since the start of FY25.
The company also raised prices in the pump segment to mitigate rising commodity costs.
Analysts Kunal Sheth and Archit Shah of B&K Securities believe the company’s performance has been impressive compared to peers, despite a challenging environment and intense competition.
Given the 14 per cent decline in the stock over the past three months, the brokerage expects positive momentum going forward.
In the lighting segment, Crompton is outperforming the sector, with growth driven by outdoor lighting and accessories.
Despite price erosion, the segment recorded a 6 per cent sales growth, led by strong volume and value growth as well as an increased share of premium products.
Sales in the Butterfly business segment continued to decline, falling by 16 per cent due to heightened competition, particularly in e-commerce channels, where aggressive discounting and weak demand in the kitchen segment are affecting performance.
The company also exited unprofitable sales channels, which further impacted sales.
However, segment margins improved by 50 bps Y-o-Y to 7.1 per cent, driven by pricing actions, better trade spend management, lower operating costs, and process interventions.
Analysts Chirag Muchhala and Rahulkumar Mishra of Centrum Research expect Crompton to report a 14 per cent revenue growth, with a 240-basis point margin expansion, resulting in a 27 per cent increase in earnings per share over the 2023-24 to 2026-27 period.
Growth will be driven by premium fans, appliances, and lighting, with Crompton also planning to expand into adjacent product categories, according to the brokerage.
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