What is wrong with Crompton Greaves?
July 20th, 2011
Shares of Electric equipment maker and Capital goods major Crompton Greaves tumbled down largely yesterday and today that the stock lost immense value. The tumbling down of the share price was in double digit percentage points during these two days. The share price is now at Rs. 176.95 after losing Rs. 30.70 in todays session. The stock is down 14.78% on the BSE today.
So, this allows us to peep inside and dig some details about the script. Some say that there are few problems with the stock.
Firstly, the well-known fact that the net profit fell by 58.6% during April – June 2011.And from what the company says, it might take two more quarters to recover to its smiling levels.
Secondly, beyond the bad quarter numbers, some section of investors are worrying that the top management lacks confidence in the company. They say this considering that the outgoing MD and non-executive chairman of Avantha Group, S M Trehan, sold 1.8 lakh shares of the company at an average price of Rs. 260 during June 29 – July 1, of course after taking the permission from the company secretary and before the closing of the trading window. Trehan says he has acquired the shares 11 years ago and being not shares-savvy, he has exited them, having retired from the company. However some section of investors say this is a potential insider trading case and there are some governance issues behind this.
Many brokerage firms are not comfortable at the developments and are giving a cautious view on the counter. UBS for example, maintains a SELL with a target of Rs. 240. Kotak feels that the results are representing a weak demand environment and not too much of the company. They have a target of Rs. 310. HSBC Asset Management Company’s Jitendra Sriram says that once the quarter goes, things will settle. SP Tulsian finds a buying opportunity in the counter. He says the script has a fair value at around Rs. 200.
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