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Add Crompton Greaves, target of Rs 151: IIFL

Posted on: March 25th, 2009 and is filed under Brokerage Recommendations.

IIFL has recommended an add rating on Crompton Greaves with a target price Rs 151 in its March 25, 2005 research report. “We met Crompton’s management post the announcement of share buyback and investment in group company Avantha Power & Infrastructure Ltd (APIL).

The management views these initiatives as the best use of cash on the parent balance sheet, as the company has slowed down its own capex plans. These two initiatives would result in cash outflow of Rs 4.51 billion during FY10.”

“Deleveraging the subsidiary balance sheets or cash conservation in a downturn would have been a more prudent strategy, in our view. However, the management was sanguine on the outlook of both domestic and overseas power T&D businesses and expressed confidence on the cash generation ability of existing businesses. In our view, more clarity on APIL’s financial details and development plans would be required to improve investor sentiment on the related party transaction. “ADD” target price of Rs 151,” says IIFL’s research report.

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