Crompton Greaves’ (CRG’s) record date for consumer demerger is declared as March 16, 2016. CRG’s consumer segment, dominated by fans, saw 17% revenue CAGR and 7% EBIT CAGR during FY05-15. Our EPS CAGR is 20% in FY16E-18E factoring minor margin improvement. R96-120/sh for consumer, implies 20-25x PE FY17E. 59% fans penetration is much higher than 2-3% AC penetration. We have valued Voltas’ (VOLT IN, R248, Buy) at 25x PE FY17E and CRG’s consumer at 20x PE FY17E.
CRG has received a revised binding offer letter for sale of its European, North American and Indonesian power systems business to US PE fund First Reserve. The deal is expected to close in 5-6 months.
Post this CRG will have ZIV (automation) and drives business overseas, of which it also expects to sell ZIV. Rs 14.5 billion is expected in end FY16E subsidiary debt. Existing debt and cash of sold subsidiaries will be transferred to CRG.
Our FY17E power and industrial segment profits imply Rs 34/sh valuation at 10x FY17E PE.
