Result Update: Eveready Industries Ltd - BUY - TP Rs.322 - Kotak

EIIL Q1FY19 result was higher than our estimates; company posted operating margin expansion following the immense disappointment in the previous quarter, when the company reported EBITDA loss. Management is able to reassure (during the course of our interaction) that most of the challenges are close to get sorted and situation across verticals have largely stabilized now.

Key Highlights

- EIIL reported 13.2% y/y revenue growth, reported at Rs 3.8 Bn in Q1FY19 driven by LED and home appliances segment. Battery business reported 8.6 y/y growth in the quarter

- Operating margins have recovered after company reporting operating loss in the preceding quarter. This makes us feel more confident about the company's ability to protect margins; and that the company is less vulnerable to fluctuations in the 1/ input prices and 2/ costs related to new business areas viz. consumer appliances, confectionary and FMCG.

Valuation & outlook

Maintain FY19/20 forecasts and DCF assumptions; we recommend 'BUY' with unchanged target price of Rs 322. Despite attractive upside potential, we expect stock to remain under pressure in the short term, susceptible to 1/ further developments in the CCI event and 2/ reversal in sales momentum.

Shares of EVEREADY INDUSTRIES INDIA LTD. was last trading in BSE at Rs.231 as compared to the previous close of Rs. 230.05. The total number of shares traded during the day was 23543 in over 657 trades.

The stock hit an intraday high of Rs. 237 and intraday low of 225.2. The net turnover during the day was Rs. 5497834.

Source : Equity Bulls

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