CROMPTON GREAVES

CROMPTON GREAVES

For Q1FY12, despite a 6% YoY rise in net sales at Rs.2438 crore, the company reported a 58% fall in net profit at Rs.79 crore. Cost of raw material rose 35%. Contribution from power sector remained poor in the single digit but more sharp was the fall in the consumer sector, which fell from 35% to 2%. The company has blamed it all on the delays in new orders in the domestic market due to a slowdown in project finalisation by customers.International business activity in Middle East was affected by around 5-10%.

More than the poor performance, the market has probably taken other factors  - former CEO SM Trehan selling his entire holding of 1.8 lakh shares during Jun 29-July 1 at an average price of Rs.260/share. And secondly, investors continue to remain miffed with its buy of an aircraft for Rs.270 crore, which is being viewed as an extravagance. The stock has been witnessing a major sell off and for the discerning long term investor, this may be a good level to accumulate. The first half of FY12 could remain tough but second half could start seeing improvement. 

The stock has been under hammer past 3-4 days where there is a probe of insider trading management was unaware of any such thing. there is a big question whether one should bet on this company as the management itself is not bullish and in their start up guidance there was no major steps taken by them.Stock has tumbled down from 240 odd levels nearly has lost 2500 Cr M cap . As the co operations is in Europe , Libya etc and there is again a possibility of Greece Defaulting . Banks have defaulted in payment of loan. Co has failed to get orders + there is a big question mark on the management strategy .  sheer competition , rising input raw material price, another Bailout in Middle East will affect the working .In short term there can be a pull back in stock but it wont be able to sustain for a long time as its investors who are holding this counter for maore than a year have lost 40%.Institutions will not invest as a clear uncertainty. The stock can slip to Rs 165-170 . A challenge is front of the management and regain its past glory.if it breaks the 165 levels then we can see it hitting 150 levels where it can get resistance.IT IS A DEBT FREE COMPANY ...MUST BE A BUY AT EVERY DIP FOR AN INVESTORS WILLING TO HOLD THE STOCK FOR ATLEAST A YEARS AND A HALF. WE COULD BE SEEING AN UPSIDE OF 275-300 AFTER A SPAN OF 18 MONTHS