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Accumulate Crompton Greaves, target of Rs 306: Angel

Posted on: June 17th, 2009 and is filed under Brokerage Recommendations.

Angel Broking has recommended an accumulate rating on Crompton Greaves, with price target of Rs 306, in its report dated June 12, 2009.

“It is pertinent to note here that during April 2005 – June 2009, CGL traded at an average discount of about 48% to the forward rolling P/E of ABB primarily due to the technological gaps and superior growth for ABB. Currently also, CGL is quoting at a hefty discount of 43-44% to ABB. However, we believe that such a high gap is unwarranted and going ahead it would narrow down as CGL has been bridging the technological gaps through various acquisitions.”

“The gap would also narrow down on the back of superior Earnings growth (15.6% CAGR for CGL as compared to 3.6% CAGR for ABB over the next two years) and higher average RoEs of 28-29% for CGL as against 21-22% for ABB. Nonetheless, some discount would continue to persist due to the relative advantage of access to the parental technology, which ABB posses. We assign CGL a Target P/E multiple of 15x and Initiate Coverage on the stock, with an Accumulate recommendation and Target Price of Rs 306,” says Angel Broking’s report.

source: Moneycontorl

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