CG Power

The company did well for Q2FY15 but it remained below analyst estimates. It posted a 19% (YoY) rise in consolidated net profit at Rs.69 crore on a 6% increase in net sales at Rs.3430 crore. The 6% rise in operating costs, 16% jump in finance cost at Rs.22 crore and the 14% higher tax outgo is what subdued the bottomline, despite a good increase in revenues. The good news here is that for H1FY15, net profit of Rs.134 crore is already 55% of FY14 net profit. With two more quarters to go, looks like it could end FY15 better.

In terms of segment wise break-up, Power Systems showed a 5% jump in revenue, EBIT up 17% and its EBIT margin improved from 2% to 2.24%. Consumer Products revenue rose 10%, EBIT was up 15% while margins rose marginally, from 11% to 12%. Industrial systems showed a 3% jump in revenue but EBIT rose  much higher, by 27% and margins improved from 7% to 9%. Thus amongst all the segments, Industrial Systems actually did the best.

The big news here in the company is that effective1st April’15, Crompton Greaves’s consumer products business will be demerged into a wholly-owned subsidiary called Crompton Consumer Products Ltd (CCPL), which will be listed. This division contributed 22% to the total revenue of the company and contribution in EBIT was pretty significant at 51%.  Thus to some extent, though the company will create more shareholder value through new listing and new independent profit center, the demerger is sure to have an impact on the earnings of Crompton. CCPL will issue three new equity shares to Crompton Greaves shareholders for every four shares held by them.

Additionally, the company is selling 8 acres of land in Kanjurmarg, Mumbai to Elvie Real Estate for Rs.302.26 crore.