CG Power and Industrial
BSE SENSEX
31,028
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
9,595
CRG IN
627
58.9 / 0.9
97 / 56
14/9/36
348
65.6
27 May 2017
4QFY17 Results Update | Sector: Capital Goods
CMP: INR93
TP: INR65(-31%)
Sell
Standalone performance ahead of estimates
Standalone operating performance exceeds expectations:
Sales rose 7% YoY to
INR12.8b (est. of INR11.6b), driven by 16.9% growth in Industrial segment, while
Power segment sales were flat YoY. EBIDTA margin at 6.3% was ahead of our
estimate of 5.8%. Adj. PAT of INR0.5b exceeded our estimate of INR0.3b, led by
higher-than-estimated other income (INR350m v/s est. of INR273m) and tax
write-back of INR101m.
Consol. performance includes Indonesian subsidiary from 4QFY17:
Consol.
revenue (incl. Indonesian subsidiary) declined 8% YoY to INR17.1b in 4QFY17
due to a decline in Power Systems (-17% YoY). Industrial segment grew 12%
YoY. EBIDTA declined 24% YoY to INR1.2b, with the margin contracting 150bp
YoY to 6.9%. Adj. PAT of INR376m was down 64% YoY. An impairment loss of
INR3b was booked post the sale of ZIV Systems in 4QFY17, while the balance is
accounted for by overseas Power T&D subs.
Sale of ZIV concludes; divestment of power business in US in final stages:
CRG
concluded the ZIV sale in March 2017 for INR7b, and is in advanced stages of
sale of its US-based power systems business. It expects the deal to conclude by
June 2017.
Maintain Sell; revise TP to INR65:
We raise our estimates for FY17/FY18 by
28%/9% to factor in: a) sale of ZIV Systems, b) Indonesian subsidiary which is
reclassified as continuing operations, c) lower losses from overseas T&D
businesses (INR1.2b/annum). We would revisit our numbers once we get more
clarity on sale/closure of overseas T&D businesses. We roll over to FY19, but
maintain
Sell
with a TP of INR65 (25x FY19E EPS, 20% premium to 5-year
average of 20x). Key upside risks to our rating are: a) sale of overseas T&D
business and b) a sharp fall in competition in domestic T&D segment.
Financials & Valuations (INR b)
Y/E Mar
2017 2018E 2019E
Net Sales
61.2
61.5
68.1
EBITDA
4.7
4.7
5.1
Adj PAT
-4.2
1.4
1.6
EPS(INR)
2.9
2.2
2.5
EPS Gr. (%)
-18.6 -25.4
15.6
BV/Sh. (INR)
65.6
67.6
69.9
RoE (%)
4.2
6.1
6.4
RoCE (%)
6.8
7.6
6.8
P/E (x)
31.9
42.8
37.0
P/BV (x)
1.4
1.4
1.3
Estimate change
TP change
Rating change
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Ankur Sharma
(Ankur.VSharma@MotilalOswal.com); +91 22 6129 1556
Amit Shah
(Amit.Shah@MotilalOswal.com); +91 22 6129 1543

CG Power and Industrial
Standalone operating performance above estimates
Standalone revenues rose 7% YoY to INR12.8b (estimate of INR11.6b), driven by
16.9% growth in the industrial segment. EBIDTA margin at 6.3% were ahead of
our estimate of 5.8%. Adjusted PAT of INR0.5b was ahead of our estimate of
INR0.3b led by higher than estimated other income (INR350m vs. estimate of
INR273m) and tax write back taken by the company (INR101m write back as
against estimate of INR79m tax payment).
Power Systems business registered muted revenue decline with revenue at
INR7.0b down 1% YoY. EBIT margins at 7.7% improved from 7.0% YoY. With the
majority of legacy orders already executed, margins have shown substantial
improvement. Crompton Greaves expects margins to remain at these levels.
Industrial systems business has been able to sustain double digit growth despite
constrained business environment. Industrial systems revenue at INR5.8b was
up 17% YoY, however operating margins declined 490bps YoY to 6.4% on
account of increase in commodity price. There is 3 months’ time lag in passing
the price increase to the consumers. CG expects the margins to bounce back in
1QFY18.
Exhibit 1: Revenue growth supported by pick up in
industrial segment
Standalone Revenue (INR m)
15 7 6 11 7 8
0 3 8 -2 4
-60
-40
Revenue Growth (% YoY)
48
1 4
3 10 7
Exhibit 2: Margins remain stable at 6.3% on YoY basis
Standalone EBITDA Margin (%)
Source: MOSL, Company
Source: MOSL, Company
Consolidated performance includes the Indonesian subsidiaries
4QFY17 consolidated revenues (ex-automation) declined 8% YoY to INR17.1b,
impacted by decline in the power systems business (down 17% YoY). Industrial
segment registered a growth of 12% YoY. EBIDTA stood at INR1.2b down 24%
YoY. EBIDTA margin of 6.9% was down 150bps YoY. Adjusted PAT of INR376m
was down 64% YoY.
27 May 2017
2

CG Power and Industrial
Exhibit 3: Consolidated - Segmental (INR m)
2QFY16
Revenues
Power Systems
Industrial Systems
Automation Systems
Others
Total
Less: Inter segment
Net Sales
EBIT
Power Division
Industrial Division
Automation Systems
Others
Total
EBIT Margin (%) / bp
Power Systems
Industrial Systems
Automation Systems
Others
Total
17,983
4,765
34
22,781
-92
22,872
367
469
-41
796
2.0
9.8
-121.5
3.5
3QFY16
15,914
4,748
35
20,696
18
20,678
-384
358
6
-21
-2.4
7.5
15.9
-0.1
4QFY16
12,703
5,790
0
18
18,511
4
18,507
1,214
433
0
23
1,670
9.6
7.5
126.1
9.0
1QFY17
7,025
5,086
2,079
48
14,238
1
14,238
756
395
-18
-6
1,126
10.8
7.8
-0.9
-12.8
7.9
2QFY17
7,413
5,767
0
55
13,235
2
13,233
653
452
0
5
1,110
8.8
7.8
9.3
8.4
3QFY17
6,622
5,787
0
32
12,441
0
12,441
780
430
0
5
1,215
11.8
7.4
4QFY17
10,578
6,462
0
63
17,104
3
17,101
908
288
0
-3
1,193
8.6
4.5
15.2
-4.7
9.8
7.0
Source: MOSL, Company
Order intake stands muted
Order intake in 4QFY17 in standalone business stood at INR11.5b (up 5% YoY),
and is largely being supported by order finalization in the power product
segment (up 11% YoY). Industrial segment registered muted growth of 4% YoY.
Valuation and view
Maintain Sell; revise target price to INR65.
We raise our estimates for FY17/FY18 by 28%/9% to factor in the a) sale of ZIV
Systems, b) Indonesian subsidiary which is reclassified as continuing operations,
c) Lower losses from overseas T&D businesses (INR1.2b/annum). We would
revisit our numbers once we get more clarity on the sales/closure of the
overseas T&D businesses.
We roll over to FY19 but maintain our SELL rating with a target price of INR65
(25x its FY19E EPS, 20% premium to the five year average of 20x). Key upside
risks to our rating are: a) Sale of Overseas T&D business; and b) a sharp fall in
competitive intensity in domestic T&D segment.
Exhibit 4: Change in estimates table
Description
Sales
EBITDA
Margins(%)
PAT
EPS
New Estimates
2017
2018E
61,198
61,198
4,702
4,702
7.7%
7.7%
1,827
1,363
2.9
2.2
2019E
61,468
4,660
7.6%
1,576
2.5
Old Estimates
2018E
2019E
55,056
59,492
4,916
5,337
8.9%
9.0%
1,021
1,419
1.7
2.3
% Change
2018E
2019E
11%
3%
-4%
-13%
-1%
-1.4%
34%
11%
28%
9%
Source: MOSL, Company
27 May 2017
3

CG Power and Industrial
Concall highlights
Divestment of ZIV has been completed in March 2017 and has received bid for
its US based power systems business. Expects the deal to close by June2017.
Indonesian business will now be retained by CG power and expects it to register
higher single digit revenue growth and have operating margin of 13%.
Indonesian business has a topline of 109m Euro in FY17 and order backlog of
142m Euro
In 4QFY17 Crompton incurred onetime loss of INR4.1b of which INR3b loss was
incurred on ZIV business (INR2.7b impairment loss and balance INR0.3b
operational loss)
Solutions business in UK and US has reached final stages of closing down and
Crompton is out of the solutions business.
Margins in the domestic industrial segment business were impacted on account
of rise in the commodity prices.
Expect debt to be reduced once overseas assets are sold off.
Going ahead plans to grow bottom line similar to sales growth or better than
sales growth. Expects margins in the transformers business to remain steady,
whereas margins in the switchgear, rotating machines, railways and drive has
possibility to improve from the current levels
INR1b loss is from the discontinued business which are yet to be divested
27 May 2017
4

CG Power and Industrial
Financials and Valuations
Income statement
Y/E March
Net Sales
Change (%)
Raw Materials
Staff Cost
Other Mfg. Expenses
EBITDA
% of Net Sales
Depreciation
Interest
Other Income
EO Items (as rep.)
PBT
Tax
Rate (%)
Reported PAT
Extra-ordinary Inc.(net)/discontinued
Adjusted PAT
Minority Int
Consolidated PAT
Change (%)
2013
120,944
7.5
83,461
17,405
16,247
3,832
3.2
2,029
955
1,000
-1,207
640
1,009
157.6
-369
-2,287
1,918
7.3
1,926
-48.4
2014
136,315
12.7
91,353
19,521
19,322
6,120
4.5
2,621
1,366
1,890
924
4,947
2,361
47.7
2,586
924
1,662
-143.4
1,519
-21.2
2015
140,131
2.8
95,305
19,936
18,466
6,424
4.6
2,620
1,443
1,670
252
4,283
2,220
51.8
2,064
252
1,811
29.9
1,841
21.2
2016
55,950
-60.1
36,116
5,590
9,941
4,302
7.7
1,717
800
1,115
-6,852
-3,951
667
-16.9
-4,618
-6,852
2,233
12.0
2,245
22.0
2017
61,198
9.4
40,141
5,371
10,983
4,702
7.7
1,500
1,880
687
0
2,009
166
8.3
1,843
6,006
-4,163
-15.7
-4,179
-286.1
2018E
61,468
0.4
40,382
5,395
11,032
4,660
7.6
1,352
1,214
880
0
2,973
394
13.3
2,579
1,200
1,379
-15.7
1,363
-132.6
(INR Million)
2019E
68,108
10.8
44,831
5,977
12,223
5,076
7.5
1,397
1,269
1,105
0
3,515
723
20.6
2,792
1,200
1,592
-15.7
1,576
15.6
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Deffered Tax Liability
Minority Interest
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Curr. Assets
Inventory
Debtors
Cash & Bank Balance
Loans & Advances
Current Liab. & Prov.
Creditors
Other Liabilities
Provisions
Net Current Assets
Application of Funds
2013
1,283
34,332
35,615
18,515
-1,681
95
52,544
53,424
24,726
28,699
1,965
7,907
59,807
16,367
31,605
5,834
6,002
45,834
24,618
16,994
4,222
13,973
52,543
2014
1,254
35,192
36,446
21,930
-1,532
118
56,962
59,233
26,825
32,408
2,184
2,989
69,171
16,714
35,913
8,150
8,395
49,790
27,737
17,988
4,064
19,381
56,961
2015
1,254
36,906
38,159
27,438
-1,110
203
64,690
55,786
26,622
29,164
737
4,414
72,485
14,552
37,318
6,893
13,722
42,109
25,281
12,704
4,124
30,375
64,691
2016
1,254
44,718
45,972
12,912
2,528
0
88,089
37,400
10,770
26,630
143
2,313
43,490
5,850
20,770
7,969
8,901
22,295
13,027
7,937
1,332
21,195
88,089
2017
1,254
39,857
41,111
12,145
2,357
0
76,871
29,787
12,270
17,518
143
2,091
50,624
8,821
18,772
7,607
15,424
25,010
13,831
9,626
1,553
25,614
76,871
2018E
1,254
41,098
42,352
12,145
2,357
0
78,111
30,787
13,622
10,165
143
2,091
53,521
8,860
20,539
8,629
15,493
25,114
13,893
9,669
1,553
28,407
72,311
(INR Million)
2019E
1,254
42,532
43,786
13,245
2,357
0
80,646
31,787
15,019
16,768
143
2,091
60,197
9,817
22,757
10,456
17,166
27,659
15,393
10,713
1,553
32,538
83,045
27 May 2017
5

CG Power and Industrial
Financials and Valuations
Ratios
Y/E March
Standalone EPS
Consolidated EPS
Growth (%)
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation (x)
P/E (standalone)
P/E (consolidated)
Cash P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors. (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2013
7.1
3.9
195.7
6.3
55.5
1.2
20.1
2014
6.8
2.9
-24.6
6.8
58.2
1.1
11.3
2015
8.3
4.2
43.9
7.1
60.9
0.8
24.0
2016
4.3
3.6
-15.2
6.3
73.3
0.0
0.0
2017
4.1
2.9
-18.6
-4.2
65.6
0.6
-7.7
2018E
2.3
2.2
-25.4
4.4
67.6
0.2
7.7
2019E
4.5
2.5
15.6
4.8
69.9
0.2
7.7
16.1
57.6
13.9
20.7
0.7
2.0
0.7
27.6
78.0
22.9
21.6
1.0
3.2
0.5
8.8
24.9
10.3
10.3
0.5
1.2
0.9
17.1
20.4
11.5
11.8
0.9
1.0
0.0
22.6
31.9
17.5
13.4
1.0
1.4
0.6
40.6
42.8
14.9
13.3
1.0
1.4
0.2
20.8
37.0
14.0
12.0
0.9
1.3
0.2
-1.0
2.8
2.2
95
49
74
2.3
7.2
4.3
5.0
96
45
74
2.4
4.9
7.3
3.3
97
38
66
2.2
5.2
5.5
3.0
135
38
85
0.6
4.2
6.8
4.1
112
53
82
0.8
6.1
7.6
4.3
122
53
82
0.8
6.4
6.8
4.4
122
53
82
0.8
0.4
0.4
0.5
0.1
0.1
0.1
0.1
Cash Flow Statement
Y/E March
PBT before EO Items
Add : Depreciation
Less : Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
CF from Oper. incl. EO Items
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
(Inc)/Dec in Net Worth
(Inc)/Dec in Debt
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
2013
1,848
2,029
2,177
2,046
4,701
3,494
-10,117
-6,623
-43
-10,160
709
8,666
897
7,524
857
4,976
5,833
2014
4,023
2,621
2,211
-3,093
2,707
3,631
-6,550
-2,919
4,919
-1,631
-1,146
3,415
587
316
2,316
5,834
8,150
2015
4,031
2,620
2,220
-12,250
-8,070
-7,818
2,743
-5,075
-1,425
1,348
209
5,508
589
5,214
-1,257
8,149
6,893
2016
2,901
1,717
667
9,725
20,527
13,675
-1,500
12,175
6,400
4,912
7,499
-10,902
0
-3,402
15,185
6,828
7,969
2017
2,009
1,500
166
-4,780
-7,444
-1,437
-1,000
-2,437
221
6,206
487
-768
442
-722
4,046
7,969
12,015
2018E
2,973
1,352
394
-1,771
961
2,161
-1,000
1,161
0
-1,016
0
0
123
-123
1,022
7,607
8,629
(INR Million)
2019E
3,515
1,397
723
-2,304
685
1,885
-1,000
885
0
-1,016
0
1,100
142
958
1,827
8,629
10,456
27 May 2017
6

CG Power and Industrial
Corporate profile
Company description
Crompton Greaves is part of the USD4b Avantha
Group, and is a global leader in the management
and application of electrical energy. It has 15,000
employees and operations across 85 countries
globally. The company is organized into three
business groups - Power Systems, Industrial
Systems and Consumer Products.
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Mar-17
Promoter
DII
FII
Others
34.4
30.5
21.3
13.9
Dec-16
34.4
31.4
19.3
14.9
Mar-16
34.4
32.2
14.0
19.4
Source: Capitaline
Exhibit 3: Top holders
Holder Name
HDFC TRUSTEE COMPANY LIMITED-HDFC
EQUITY FUND
RELIANCE CAPITAL TRUSTEE CO. LTD A/C
RELIANCEEQUITY OPPORTUNITIES FUND
LIFE INSURANCE CORPORATION OF INDIA
SAMENA SPECIAL SITUATIONS MAURITIUS
BIRLA SUN LIFE TRUSTEE COMPANY PRIVATE
LIMITED A/C BIRLA SUN LIFE FRONTLINE
EQUITY FUND
% Holding
9.2
9.2
5.2
4.9
4.2
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Gautam Thapar
KN Neelkant
Madhav Acharya
Manoj Koul
Designation
Chairman
Managing Director &
CEO
Executive Director &
CFO
Company Secretary
Exhibit 5: Directors
Name
B Hariharan
Ramni Nirula
Shirish Apte
Name
Omkar Goswami
Sanjay Labroo
V Von Massow
*Independent
Source: Capitaline
Exhibit 6: Auditors
Name
Ashwin Solanki & Associates
Chaturvedi & Shah
K R Chandratre
Sharp & Tannan
Type
Cost Auditor
Statutory
Secretarial Audit
Statutory
Source: Capitaline
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY18
FY19
MOSL
forecast
2.3
4.5
Consensus
forecast
4.6
5.4
Variation (%)
-49.6
-17.3
Source: Bloomberg
27 May 2017
7

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