Lehman Brothers equity research has initiated coverage on Crompton Greaves with an OVERWEIGHT rating and an EqualWeight rating on ABB India Ltd.
Crompton Greaves Ltd: CGL
Large investments in the Indian power transmission and distribution (T&D) sector will likely drive impressive earnings growth for CGL over the next five years. CGL is among the five largest power T&D equipment manufacturers in India with a presence across product categories. The company will likely benefit from large opportunities in the Indian power T&D sector, where we estimate a market of INR1870 bn over the next five years.
European acquisitions [Ganz Transelektro and Microsol Holdings] have plugged the gaps in CGL’s product portfolio and have given the company access to the growing European and North American markets. Apart from high-voltage direct current (HVDC) technology, CGL now has access to a full suite of T & D products and services. CGL has an unexecuted order book of INR70 bn.
CGL is expected to report a PAT of Rs 548 crore for FY08 and RS 682 crore for FY09. Lehman has set a one year price target of Rs 500 on the stock.