Crompton Greaves Consumer Share Price Target at Rs 410: Kotak Securities

Crompton Greaves Consumer Share Price Target at Rs 410: Kotak Securities

Kotak Institutional Equities has issued a resounding BUY call on Crompton Greaves Consumer, setting a fair value target of Rs 410 against the current market price of Rs 344. The report underscores the company’s strategic foray into the solar rooftop segment, the immense addressable market, and robust financial projections through FY2028. Investors are advised to weigh the company’s late entry, execution risks, and dependence on government subsidies, while also considering the potential for significant returns and margin accretion.

Crompton Greaves Consumer: Opportunity and Risks

Crompton Greaves Consumer is making a calculated entry into India’s burgeoning residential solar rooftop market, leveraging its brand, distribution, and sourcing prowess. The PM Surya Ghar scheme has only scratched the surface, covering 15% of targeted households, leaving a vast untapped market. Kotak’s research projects Rs 4.5 billion in solar rooftop sales with an 8% EBIT margin by FY2028, but cautions that execution and policy risks remain significant.

Key Investment Levels and Target for Crompton Greaves Consumer

Current Market Price (CMP): Rs 344
Fair Value Target: Rs 410
52-Week Range: Rs 484 (High) / Rs 301 (Low)
Market Capitalization: Rs 221 billion
Recommendation: BUY
Upside Potential: Over 15% in the next 12 months

Solar Rooftop: A Market Ripe for Disruption

The PM Surya Ghar scheme has catalyzed residential solar adoption, but only 1.5 million out of a 10 million household target have been converted so far. Crompton’s entry is timely, as the market remains highly fragmented and dominated by unorganized players. The scheme’s central financial assistance, capped at Rs 657 billion, and a total outlay of Rs 750 billion, have so far resulted in only Rs 84.5 billion in subsidies disbursed. Notably, 45% of beneficiaries are now experiencing zero electricity bills, demonstrating the scheme’s tangible impact.

Crompton’s Strategic Advantages in a Fragmented Market

Brand Equity and Distribution Muscle: Crompton’s extensive dealer network (over 250,000 dealers) positions it to efficiently scale site visits, installations, and aftersales service, especially in underserved regions.

Bulk Sourcing and Cost Efficiency: The company’s ability to procure panels and inverters at scale provides a cost advantage, even as it competes with backward-integrated giants like Tata Power and Waaree.

Consumer Trust and Warranty Support: The PM Surya Ghar scheme mandates a five-year system warranty, with modules carrying a 25-year warranty. Crompton’s established brand inspires greater consumer confidence compared to fly-by-night operators.

Financial Projections and Segmental Performance

Revenue and Margin Outlook: Kotak projects Crompton’s solar rooftop revenues to reach Rs 4.5 billion by FY2028, with an EBIT margin of 8%. The business model is expected to be RoCE accretive due to minimal capital expenditure and negative working capital (90% customer payment upfront).

Segmental Revenue Table:

Year ECD Revenue (Rs mn) Lighting Revenue (Rs mn) Butterfly Gandhimathi (Rs mn) Net Sales (Rs mn) EBITDA Margin (%) EPS (Rs)
2025 60,100 10,203 10,566 78,636 11.3 8.6
2026E 66,201 10,713 9,225 86,141 11.4 10.0
2027E 76,262 11,356 8,333 97,991 12.1 12.3
2028E 86,527 12,037 9,227 110,230 12.0 14.3

Payback Dynamics: Subsidy as a Game-Changer

With the current subsidy, a 3.24 kW solar rooftop system has a payback period of 3.9 years, which balloons to 7.8 years without subsidy. This stark difference underscores the sector’s dependence on government support. The financial viability could weaken if the subsidy is withdrawn or reduced, making Crompton’s solar push closely tied to policy continuity.

Competitive Landscape: Crompton’s Position Among Peers

The residential solar rooftop market is highly unorganized, with the top three players holding less than 25% cumulative market share. Crompton’s entry pits it against established brands like Tata Power Solar, Havells, and a plethora of small EPC firms. Its late entry is a risk, but the company’s scale and execution capabilities could drive market share gains.

Risks and Execution Challenges

Late Entrant Disadvantage: Crompton is playing catch-up and must demonstrate superior execution to outpace incumbents.

Operational Learning Curve: The company lacks experience in rooftop installations and will rely on third-party partners, exposing it to potential missteps in project management and after-sales support.

No Captive Manufacturing: Crompton is at a cost disadvantage versus fully integrated players, which may compress margins until scale is achieved.

Subsidy Dependence: The business’s fortunes are closely linked to the continuation and quantum of government subsidies.

Valuation Metrics and Investor Takeaways

Key Valuation Multiples:

P/E (2025E): 39.8x

P/E (2026E): 34.5x

P/E (2027E): 27.9x

RoE (2025E): 17.4%

Dividend Yield (2025E): 0.9%

Investor Guidance:

Entry Level: Rs 344

Target: Rs 410

Risk Level: Moderate, given execution and policy uncertainties

Time Horizon: 12 months

Bottomline: Crompton’s Solar Bet—A Calculated Risk with Promising Upside

Kotak’s BUY call is anchored in Crompton’s ability to leverage its brand, distribution, and sourcing strengths in a market primed for formalization. While execution and policy risks loom large, the upside potential—driven by a vast addressable market and robust financial discipline—makes Crompton Greaves Consumer a compelling pick for investors with a medium-term horizon.

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