Crompton’s consumer durables business on track, but Butterfly recovery is taking longer

Crompton Greaves Consumer Electricals Ltd’s shares have gained 9% since its September quarter results (Q2FY25) were released around mid-November. Consolidated gross margin expanded year-on-year, pushing Ebitda growth to 16.5%, ahead of 6% revenue growth.

This could be exciting for investors, coupled with the fact that Crompton’s electric consumer durables (ECD) business saw double-digit revenue growth for the fifth straight quarter. ECD revenue rose by 12.5% in Q2 to ₹1,393 crore or 73% of consolidated revenue. This was led by 26% and 20% growth in appliances and pumps, respectively. 

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The fans segment, ECD’s largest revenue contributor, saw growth moderate to 5% after clocking far higher 16% growth in the June quarter. The non-ceiling fans portfolio did well in Q2. Also, launches in the premium segment such as Swirl, Aura and Santos led to a better premium mix. 

Crompton’s management pointed out that it has been hiking prices of fans regularly, but has observed that sometimes, particularly in Q2, that there has been a lag in several competitors undertaking price hikes.

Butterfly yet to take flight

Crompton’s remaining revenue comes from the lighting and Butterfly businesses, each of which contributed 13% of Q2 revenue. Strong delivery in the business-to-customer (B2C) segment helped on-year revenue growth in lighting improve to 6% from 2% in the June quarter.

Kitchenware maker Butterfly is yet to see a marked recovery, with its business in the midst of a refresh. Butterfly revenue has fallen about 18% in each of the past two quarters. Similar to Q2, Crompton’s consolidated profit growth was stronger than revenue growth in the first half of FY25. 

“We slightly cut FY25-27 estimated earnings per share (EPS) by about 2% in view of Butterfly’s weak performance,” said Jefferies India in a 17 November report. Butterfly integration and synergies will be monitored, it added.

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Crompton’s shares are 16% below their 52-week high of ₹484 on 2 September. The stock trades at 35.5 times estimated FY26 earnings, according to Bloomberg data. Nomura Research believes Butterfly can deliver a stronger FY26 with a premium product portfolio and a low base. 

“Price hikes and operating leverage should drive Ebitda margin from about 11% in FY24 to about 12.1% by FY27 (forecast), leading to a healthy 24% compound annual growth rate in EPS,” said Nomura’s analysts. 

In the near term, Crompton is set to benefit from higher premiumisation and new product launches, while demand slowdown and delays in Butterfly synergies are key risks.

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