Energizer Holdings, Inc.
ENR Details
Energizer Holdings, Inc. (NYSE: ENR) is one of the leading primary batteries and portable lighting products globally. Its key global brands include Energizer, EVEREADY, Rayovac, and VARTA.
Key Positives:
Increase in Net Margin (5.3% in FY21 vs 1.8% in FY20), Increase in ROE (48.4% in FY21 vs 11.4% in FY20)
Key Negatives:
Decrease in Quick Ratio (0.75x in FY21 vs 1.03x in FY20), Higher Cash Cycle (81.9 Days in FY21 vs Industry Median of 55.9 Days)
Key Risks:
Competitive Risk, Operational Risk, Inflation Risk, Margin Risk, Macro Risk
Result Performance for the First Quarter Ended 31 December 2021 – (Q1FY22)
- The company reported net sales of $846.3 million in Q1FY22, compared to $848.6 million in the prior year period.
- Gross margin reflected at 36.8% in Q1FY22 versus 39.8% in Q1FY21, owing to product cost impacts.
- Diluted net Earnings per share stood at $0.83, and Adjusted earnings per share stood at $1.03 for Q1FY22.
- The Group made dividend payments during the quarter amounting to ~$20.5 million.
Source: Company Reports, Analysis by Kalkine Group
Key Update
- The company has updated that it will report its Q2FY22 results on 09 May 2022.
- On 8 March 2022, the company announced the completion of a $300 million offering of 6.500% senior notes due 2027 guaranteed by certain of the company's domestic restricted subsidiaries.
Outlook
The company forecasts net sales to be flat, Adjusted earnings per share between $3.00-$3.30 and Adjusted EBITDA of $560-$590 million for FY22. The management will look to negate the current volatile environment through additional pricing and cost reduction opportunities.
Key Risks
The company is exposed to the risk of currency fluctuations, which may adversely hurt its financial performance. In addition, volatility in production costs, primarily the raw material prices, could erode its profit margins. The Group is also prone to the risk of supply chain disruption of key essential components.
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 has delivered a 6-month and 1-year return of ~-16.28% and ~-38.52%, respectively. In addition, the stock is trading lower than the average of the 52-week high price of $51.20 and the 52-week low price of $29.01.
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 solid FY22 guidance and focused pricing strategy.
Considering the higher battery demand, along with strong organic growth and decent outlook, we give a “Buy” recommendation on the stock at the current market price of $30.37 per share, as on 9.39 am New York Time, USA (GMT-4) as of 27 April 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.
Energizer Holdings, Inc. (ENR) 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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