CROMPTON - Crompton Greaves Consumer Electricals Limited Share Price

Crompton Greaves Consumer Electricals Limited's management provided an optimistic outlook for the coming years, anchored by strategic initiatives and expansion plans. Key highlights include:

1. New Manufacturing Facility: Management announced plans for a greenfield manufacturing facility with an investment of approximately Rs. 350 crore. This facility aims to elevate supply chain quality and responsiveness, focusing initially on fan production, with the first phase expected to be operational in 2-3 years.

2. Revenue Growth Prospects: The company anticipates continued revenue growth, with FY25 recording a 10% increase in standalone revenue to Rs. 7,028 crore and a consolidated profit growth of 28%. The management expects sustained growth in the electric consumer durables (ECD) segment, projecting similar growth rates despite softening demand conditions.

3. Expansion into Solar Rooftops: As part of the Crompton 2.0 strategy, the company will enter the solar rooftop market, targeting a total addressable market of about Rs. 20,000 crore. With prior success in the solar pump business, achieving about Rs. 200 crore in sales, Crompton aims to leverage brand trust and supply chain capabilities to penetrate the solar segment effectively.

4. Strong Performance in Existing Segments: The ECD segment grew 11% in FY25, with pumps and lighting showing promising results. The lighting segment's EBIT margins improved to 11.8% in FY25, reflecting a strong product mix and new introductions.

5. Butterfly Appliances Growth: The Butterfly business reported Rs. 865 crore in annual revenue with a 12% YoY growth in Q4 FY25. Management noted ongoing improvements in gross margins due to efficiency enhancements and pricing adjustments.

Overall, management's forward-looking statements reveal a commitment to innovation, strategic expansions, and revenue growth, aiming for a robust performance amidst evolving market conditions.

Major Questions and Answers from the Q&A Session

1. Question: "Could you give us some detail on how you are thinking of scaling up in the solar rooftop business and your competitive edge?"

   Answer: "We estimate the market size for the solar rooftop business to be around Rs. 20,000 Cr. We've concentrated on hiring the right talent and understanding product execution. Considering our brand strength, similar to our successful launch in the solar pump sector, I believe we'll effectively capture market share. While I won't disclose specific revenue goals, our established capabilities give us confidence in achieving a quick ramp-up."

2. Question: "What's happening with the Large Kitchen Appliances business given its revenue growth remains flat? What are your long-term ambitions here?"

   Answer: "You're correct; revenues haven't met expectations. However, we're confident in our differentiated product offering. Our focus is on improving execution and targeting, which will help narrow losses and boost revenue. We are investing significantly in the kitchen segment with new products, so I expect promising growth in this area moving forward."

3. Question: "How do you foresee recovery in the ECD segment given subdued demand this quarter? Will premium launches contribute significantly?"

   Answer: "There has been some impact from new fan launches, but they have only started contributing limitedly. We have a major launch coming, the Fluido Fan, which we expect will generate additional revenue. While weather delays have influenced our growth, we anticipate a rebound as conditions improve."

4. Question: "Regarding the new manufacturing facility with a Rs. 350 Cr investment, will it focus solely on fans in the first phase?"

   Answer: "The initial phase will focus on fans, but it will also encompass land costs. We believe this state-of-the-art facility will cater to a significant production capacity. Future phases may include additional products once the fan capacity is solidified."

5. Question: "What is your view on sourcing and maintaining a mix between in-sourcing and outsourcing in production?"

   Answer: "We do not plan to transition entirely to an in-sourced model. While we're enhancing in-house capabilities, we will always maintain a balance with outsourcing to ensure flexibility. Our growth projections still necessitate a blend of both strategies."

6. Question: "Can you elaborate on the potential of your solar pump business? Do you see it as episodic or sustainable growth?"

   Answer: "We view solar pumps as a sustainable business, bolstered by the PM KUSUM scheme. Our leading position in residential pumps gives us confidence that this segment will continue to grow. As the need for reliable, continuous power persists, we expect ongoing demand for our solar solutions."

7. Question: "How are you measuring effectiveness in NPD for Butterfly, and what can we expect regarding brand positioning?"

   Answer: "We're actively planning new product developments for Butterfly, targeting launches ahead of the season. Our strategy includes improving brand presence, particularly outside the South. Expect strong synergies between Crompton and Butterfly in this regard, leveraging brand strength across regions."

8. Question: "What do you expect the margins in the Lighting segment to look like going forward? Are we back to normal growth levels?"

   Answer: "The lighting segment's margins have improved due to an enhanced product mix. While ensuring growth, we've also focused on cost reductions. Future growth initiatives will help return to balanced performance."

9. Question: "Given your reliance on the government for incentives in the solar rooftop business, how will you manage growth post-subsidy?"

   Answer: "Current government support through subsidies is indeed a driver, but we believe this sector will maintain momentum independent of them. The trust associated with the Crompton brand and the fundamental need for solar solutions among consumers will sustain the business's growth trajectory even after subsidies potentially phase out."

These questions and answers cover critical strategic points regarding Crompton Greaves' plans, challenges, and market outlook, demonstrating the company's initiatives in scalability, product development, and reliance on brand strength.