EnerSys
ENS Details
EnerSys (NYSE: ENS) provides stored energy solutions for industrial applications. Also, it manufactures and distributes energy systems solutions and motives power batteries, specialty batteries, battery chargers, power equipment, battery accessories and outdoor equipment to customers internationally.
Result Performance for the Third Quarter Ended 2 January 2022 (Q3FY22)
- The company clocked record net sales of $844 million in Q3FY22, reflecting 12% increase on Q3FY21. The sales have been driven by a combination of aggressive pricing and organic volume growth.
- Net earnings stood at $36.3 million in Q3FY22, or $0.85 per diluted share, including the tax impact of $6.7 million, or $0.16 per diluted share.
- The Group has made continued progress on technology, new products, and onshoring during the quarter. It has also announced $116 million in share buybacks from the onset of the quarter through 9 February 2022.
Source: Company Reports, Analysis by Kalkine Group
Key Update
- On 21 April 2022, the company has released its first-ever 2021 Sustainability Report, which details out the progress on key ESG issues.
- On 9 March 2022, the company’s Board of directors established a new $150 million stock repurchase plan with no expiration date. This new authorization accumulates to a total outstanding repurchase of $181 million, including $31 million available under the Board’s previous repurchase plan.
- On 3 March 2022, the company announced that it had begun suspending its operations in Russia.
Outlook
The company has been able to offset the inflationary pressure by aggressively pricing its products with an uptick in volumes. However, it has further potential to perform keeping in view supply chain constraints during Q3FY22, backed by decent order rates. It reported backlog at record $1.2 billion, reflecting at 2x of normalized levels.
Key Risks
The company is prone to the impact of foreign currency volatility that can have an impact on the realization of sales. It has also been hit by supply chain constraints and the risk is coupled with high inflation levels, which can impact the profitability of the company.
Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)
Technical Overview:
Daily Price Chart
Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)
Stock Recommendation
The company’s stock has delivered a 6-month return of ~-22.70%. In addition, the stock is trading lower than the average of the 52-week high price of $100.23 and the 52-week low price of $64.86.
The stock has been valued using an EV/Sales multiple-based illustrative relative valuation, and the target price so arrived reflects a rise of low double-digit (in % terms). Accordingly, a slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering organic solid volume growth and price action to drive financial outlook, along with a strong order backlog.
Considering the facts above, we give a “Buy” recommendation on the stock at the current market price of $ 64.17 per share, as on 9.58 am New York Time, USA (GMT-4) as of 06 May 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
EnerSys (ENS) is a part of Kalkine’s Global Fully Charged Product
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
Technical Indicators Defined:-
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices
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