Near-term uncertainty in quarterly performance, especially linked to pace of overseas margin turnaround, holds us back from an overweight recommendation for Crompton Greaves. The pace of overseas margin turnaround is crucial. If we increase FY15 overseas power Ebit margin by ~300 bps to 5%, our FY15 consolidated EPS increases by ~25% and PT increases 32% to Rs 113.
We deliberate on the delta forces that could shape the outlook of and drive Crompton Greaves value. We believe ~15% rupee depreciation YTD could provide a boost to CG standalone export competitiveness. Management strategy is also aligned. Standalone export revenue has declined for four consecutive years, reducing its share from 24% of standalone top line in FY09 to 11% in FY13. In addition, full factories to drive margin discipline on new orders. Large domestic and overseas factories of Crompton Greaves are running at full capacity allowing management leeway in booking fresh orders selectively, pointers to easing working capital.