CROMPTON - Investment Analysis: Buy Signal or Bull Trap?
Last Updated Time : 20 Dec 25, 07:05 am
Back to Investment ListInvestment Rating: 3.2
| Stock Code | CROMPTON | Market Cap | 16,468 Cr. | Current Price | 256 ₹ | High / Low | 402 ₹ |
| Stock P/E | 33.4 | Book Value | 56.1 ₹ | Dividend Yield | 1.17 % | ROCE | 20.1 % |
| ROE | 16.5 % | Face Value | 2.00 ₹ | DMA 50 | 273 ₹ | DMA 200 | 313 ₹ |
| Chg in FII Hold | -3.64 % | Chg in DII Hold | 2.31 % | PAT Qtr | 85.3 Cr. | PAT Prev Qtr | 125 Cr. |
| RSI | 40.4 | MACD | -6.69 | Volume | 1,60,08,382 | Avg Vol 1Wk | 51,62,673 |
| Low price | 248 ₹ | High price | 402 ₹ | PEG Ratio | -19.3 | Debt to equity | 0.05 |
| 52w Index | 5.03 % | Qtr Profit Var | -30.8 % | EPS | 7.42 ₹ | Industry PE | 49.3 |
📊 Analysis: CROMPTON offers decent fundamentals with ROE at 16.5% and ROCE at 20.1%, both above compounding thresholds. Valuation is moderate with P/E at 33.4 compared to industry average of 49.3, suggesting relative attractiveness. Debt-to-equity is very low (0.05), indicating strong balance sheet health. Dividend yield at 1.17% adds shareholder value. However, PEG ratio (-19.3) reflects weak earnings growth outlook, and quarterly PAT dropped significantly (-30.8%). Technicals show RSI at 40.4 (weak momentum), MACD negative (-6.69), and price below both 50 DMA (273 ₹) and 200 DMA (313 ₹), indicating bearish sentiment.
💡 Entry Zone: Ideal entry would be in the 240–255 ₹ range, closer to support levels and valuation comfort. Current price (256 ₹) is near fair entry zone, but waiting for stability around 250 ₹ offers better margin of safety.
📈 Exit Strategy: If already holding, consider medium-term holding (12–24 months) given strong ROE/ROCE and low debt. Exit near 300–320 ₹ resistance if growth metrics don’t improve. Long-term holding is viable only if earnings growth stabilizes and PEG ratio turns positive.
Positive
- 📌 Strong ROE (16.5%) and ROCE (20.1%) support compounding potential
- 📌 Low debt-to-equity (0.05) ensures financial stability
- 📌 Dividend yield of 1.17% provides shareholder returns
- 📌 Valuation attractive vs industry PE (33.4 vs 49.3)
Limitation
- ⚠️ Weak earnings growth reflected in negative PEG (-19.3)
- ⚠️ Quarterly PAT decline (-30.8%) raises concerns
- ⚠️ Price below 50 DMA and 200 DMA indicates bearish trend
- ⚠️ RSI at 40.4 shows weak momentum
Company Negative News
- ❌ Quarterly profit dropped from 125 Cr. to 85.3 Cr.
- ❌ FII holding decreased by -3.64%
Company Positive News
- ✅ DII holding increased by 2.31%
- ✅ Strong balance sheet with minimal debt
Industry
- 🏦 Industry PE at 49.3 suggests sector is richly valued
- 🏦 Consumer electricals sector remains resilient with steady demand
Conclusion
🔎 CROMPTON is moderately attractive for long-term investors due to strong ROE/ROCE and low debt. Entry near 240–255 ₹ offers margin of safety. Existing holders can maintain positions for 12–24 months, targeting exits near 300–320 ₹ unless earnings growth improves. Long-term compounding potential depends on stabilizing profits and positive PEG trajectory.
Would you like me to extend this into a sector benchmarking overlay comparing CROMPTON against peers like Havells, V-Guard, and Bajaj Electricals to highlight relative valuation comfort zones?
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