Trade Call: Burman Family-Backed Stock To Buy This Week For TP of Rs 430

Eveready Industries India Ltd (EIIL), is a century-old corporation, with a significant position in the light and dry cell battery industries. It was founded in 1934. The Burman family, who are Dabur India's promoters, acquired the majority stake in the company in 2021. It now works in three segments: lighting & electrical products for consumer and business sectors; batteries; and flashlights & torches. With over 50% of the market share for dry cell batteries and battery-operated flashlights in FY23, the company has continued to have a commanding lead in both markets. From 2019 until 2022, the Burman family-promoters of Dabur-consistently grew to own a majority of EIIL, taking over as the company's promoters.

EIIL Likely To Double Its Revenue And Improve Profitability In 3-4 Years

"The Burman family, with its renowned history and track record of success, brings a wealth of experience and leadership to EIIL. Over the years, the Burman family's leadership has been instrumental in steering Dabur India Ltd (Dabur) through various challenges and transforming it into a global FMCG powerhouse. Drawing from their experiences at Dabur, the Burman family is well-positioned to provide strong leadership to EIIL. According to them, EIIL possesses a strong brand and longstanding legacy, suggesting significant potential for growth and value creation. The Burman family prioritize businesses where they can turn around the assets and have the management depth to add value. The Burmans believe that with the right strategy and a capable team to execute it, EIIL can double its revenue and improve its profitability in 3-4 years," said the brokerage firm Keynote Capitals Limited.

EIIL Growth Strategy

"The Company is endeavoring to transform itself from several years of revenue stagnation to a growth-oriented trajectory, with a primary focus on enhancing profitability. The management is guiding to double the revenue in 3-4 years. The growth will be driven by a change in the product mix in the battery and flashlight segments. The Company is expecting a three-fold increase in revenue from the lighting & electrical segment over the next 3-4 years. Further, it expects margin improvement which is visible in 9MFY24 compared to FY23, said Chirag Maroo, Research Analyst at Keynote Capitals Limited.

"EIIL has a strong distribution network spanning over 4 Mn touchpoints, reaching the retail trade from urban centres to deep into the interiors of the country. To optimally leverage this extensive network, the Company is in the process of rejuvenating the brand with the right approach and optimizing distribution network, with a focus on new growth areas," he further added.

Eveready Industries Share Price Target

"We initiate coverage on Eveready Industries India Ltd. with a BUY rating and a target price of Rs. 430 (30x FY25 PE). We believe that EIIL is set to grow its revenue by 9% and improve its PAT margins from ~2% in FY23 to ~7% in FY25E, because EIIL is set to focus on premiumization and improving its presence in the alkaline batteries and rechargeable flashlight segment," commented Chirag Maroo.

Eveready Industries Valuations

"Based on our analysis, we anticipate overall revenue growth of ~9%, primarily driven by lighting and flashlight segments. Furthermore, we project an improved trajectory for margins in the future. This is attributed to the lighting segment EBITDA margin turning positive, a marginal improvement in employee cost, a decrease in A&P expense, and a decline in interest expense resulting from reduced debt. The Company continue to make investments in brand development and improving its distribution," the analyst said.

"Further, it emphasizes on premiumization and significantly improving its presence in the alkaline and rechargeable flashlight segment. With a range of revamping of existing categories and the launch of new verticals, the Company is well-positioned to maintain its growth momentum. Considering all these factors, we have assigned a price-to-earnings (P/E) multiple of 30x to our estimated earnings per share (EPS) for FY25E," added Chirag Maroo.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.