Eveready Industries – Give Me Red ( Multibagger)

Eveready Industries India Limited (EIIL)  is a leader in dry cell batteries and flashlights. Ask any Indian consumer to name a Battery and the first brand that comes to mind is Eveready. Not just among batteries, Eveready is a powerful brand across categories. It  is a good pick in the relatively defensive FMCG segment.its distribution network, the company has diversified into products like packed tea, insect repellents and compact fluorescent lamps (CFL).FMCG companies usually trade at a substantial premium to their book value.

Incorporated in 1934, the company has traditionally been the manufacturer and marketer of carbon zinc batteries, rechargeable batteries, alkaline batteries and flashlights under the Eveready brand. Over the years, the company has emerged as the largest dry cell battery player with a market share of more than 50%, with the largest distribution networks across the country.The company witnessed a period of stagnation in growth since FY02 posting losses in the four intermittent years. Higher debt on the company’s books resulted in larger interest costs. The company currently has plans to leverage its national distribution network to market other FMCGs like packaged tea, insect repellents and CFL.In the case of its tea business, the company has not really aggressively advertised its four brands such as Tez, Jaago, Premium Gold and Classic, which are positioned for different consumer segments. The company’s insect repellent business is still relatively new. It has launched mosquito coils over the target markets across the country. The market share is varying between 1% and 4% in various states.









Eveready has charted out an aggressive growth strategy by entering into new categories in the power source and lighting space. It is launching products in the alternative lighting space based on the energy-efficient LED (light emitting diode) technology. It is bullish on increasing its presence in the rural markets. Eveready Industries India plans to increase it product portfolio in future. The company is conducting test marketing of dishwash detergent and after successful completion it will launch the product. The small cap company is expecting its sales growth to increase to 13-15 percent in H2 FY15. ED Amritanshu Khaitan believes the growth is stable in battery segment with the AAA segment growing at 15-20 percent.

Key Pointers:

• Leading player with  in both batteries (more than 50% market share in 2.5 billion pieces (volume) Indian battery market) and flashlight (75+% market share in the 35 million pieces (volume) Indian organised flashlights market) segment.

• A trusted brand for over 100 years with the business verticals: Batteries, Flashlights, Lighting and Electricals, Packet Tea and Exports.

• Revenue growth: 969 cr (Mar ’10) to 1152 cr (Mar ’14)

• Last year revenue growth is 11% (from 1034 cr (Mar ’13) to 1152 cr (Mar ’14))

• Last year operating profit grew almost 37% (from 66 cr (Mar ’13) to 91 cr (Mar ’14))

• The EBIDTA margin expansion from 6.4% to 7.9% took place due to consistent price increases in core

• Debt has come down from 285 cr (Mar ’12) to 225 cr (Mar’ 14)

• EPS has gone up by 167% YoY (from 0.7 (Mar ’13) to 1.87 (Mar ’14))

Financials:

Eveready came up with excellent set of numbers yesterday. Revenues increase 11% YoY and Net Profits increased 376% YoY. If they keep growing like this then by March revenues I expect the revenues around 1200 cr and Net Profit – 50 cr at 4% net margin. This will mean EPS of 8 and with P/E of 30 the price should hover around 240+. The CMP is 140. The FII holding has also gone up in JAS to 3.4%. In March ’14 FII holding was 2.04%.

Key Numbers	Sep’ 14	June’ 14	Mar ’14	Dec’ 13	Sep ’13	June ’13	YoY% (S)	YoY% (J)
Sales	354	323	257	296	319	279	11%	16%
EBIDTA	30.8	23.3	7.3	14.6	15.2	20.2	103%	15%
EBIDTA (%)	8.7%	7.2%	2.8%	4.9%	4.8%	7.2%
Net Profit	17.6	10.6	1.25	4.5	3.7	4.1	376%	159%
Net Profit(%)	5.0%	3.3%	0.5%	1.5%	1.2%	1.5%
EPS	2.43	1.46	0.17	0.62	0.51	0.57	376%	156%

The company has venture into new categories like electricals. It is focusing on initiatives to reduce cost and increase the profit margin. The FII (foreign institutional investors) are showing interest and have increased their stake in the company to 4% and DII have increased stake to 10%. Seems like a good stock for future if they keep increasing their margins and decreasing debt on books.

Interview update of the management ( link below)

www.moneycontrol.com/news/resultsboardroom/see-topline-grow-10-15-margins-at-10-for-fy15-eveready_1225722.html?utm_source=ref_article