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Maintain buy on Eveready with 15% upside; LED, appliances to propel growth: MOST

Motilal Oswal has maintained a buy on Eveready Industries with a target price of Rs 358, an upside of 15 percent and sees growth acceleration led by LED and appliances.

Eveready Industries on Monday reported 39.36 percent decline in standalone net profit to Rs 13.56 crore for the first quarter ended June 30, hit by de-stocking in trade channels ahead of GST implementation. Revenue from operations during the period under review were at Rs 357.66 crore as against Rs 371.79 crore in the same period last fiscal, down 3.8 percent.

Research and broking firm, Motilal Oswal has maintained a buy on the stock with a target price of Rs 358, an upside of 15 percent from the current level. In the quarter gone by, Eveready's revenue was in line while earnings before interest, taxes, depreciation and amortization (EBITDA) and profit after tax was below estimates. The company reported overall revenue of Rs 357,7 crore (estimate of Rs 345.7 crore) in Q1 FY'18 against Rs 371.8 crore in Q1 FY'17, marking de-growth of 3.8 percent, mainly due to a significant drop of 10 percent YoY in battery volumes and 8 percent in flashlight turnover. STOCK FREE TIPS

Motilal Oswwal believes that growth will accelerate backed by LED and appliances. Its appliances segment’s revenues grew strongly by 257 percent YoY to Rs 18 crore in Q1 FY'18. The company’s expectation of turnover of Rs 100 crore in FY'18 from the segment would allow it to capture 1 percent of the market share, and thus, capitalise on the significant opportunity to grow. LED products too witnessed robust turnover growth of 179 percent YoY to Rs 50.3 crore, keeping growth in lighting flattish (inspite of de-growth in CFL), with EBITDA margin of 7 percent. With the GST transitional phase almost over, demand is expected to pick up, also helped by early festive season and good monsoon.

Eveready Industries is expected to reap the benefits of robust growth in LED and appliances, along with the batteries and flashlight segments recovering from GST turbulence. Motilal Oswal has maintained its earnings estimates, with revenue/PAT compound annual growth rate (CAGR) of 10 percent/13 percent over FY'17-19E. and values the stock at 22x FY'19E earnings per share (EPS).

At 10:40 hrs Eveready Industries India was quoting at Rs 302.00, down Rs 8.00, or 2.58 percent. It has touched an intraday high of Rs 311.55 and an intraday low of Rs 300.50.


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