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, speciality batteries, battery chargers, power equipment, battery accessories and outdoor equipment to customers internationally.
Result Performance for the Third Quarter Ended 2 January 2022 (Q3FY22)
- Net sales stood at $844.0 million in Q3FY22, up 12.4% YoY and up 6.7% QoQ, primarily driven by a 10% rise in organic volume due to strong demand from the markets and the easing of the pandemic circumstances and a 3% increase in pricing.
- Net earnings stood at $36.3 million in Q3FY22, or $0.85 per diluted share, including the impact of $6.7 million, or $0.16 per diluted share. At the same time, the net earnings for Q3FY21 stood at $38.6 million, or $0.89 per diluted share, which includes the impact of $16.4 million, or $0.38 per diluted share.
- The adjusted net earnings per diluted share, on a non-GAAP basis, stood at $1.01 in Q3FY22 versus the guidance of $0.96-$1.06 per diluted share.
Source: Company Reports, Analysis by Kalkine Group
Key Update
- 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 management's pricing initiatives indicate a stronghold, especially in Energy Systems. Further, the company work through open orders, which could realize the benefit in Q4FY22. The company stays focused on execution under the current environment and remains confident in underlying demand. The order rates of the company are strong, with growing backlog to $1.2 billion, 2x normalized levels. Moreover, the aggressive pricing actions are giving promising results.
Key Risks
The company operates in a competitive industry and are subject to pricing pressures. Further, the government reviews, inquiries, investigations, and actions could harm the business or reputation. Reliance on third-party agreements and derivative instruments could adversely impact the company’s business. The operating results could be affected by changes in the cost and availability of raw materials.
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 and 1-year return of ~-5.87% and ~-22.59%, respectively. 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 $67.71.
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.
Considering the facts above, we give a “Buy” recommendation on the stock at the current market price of $70.99 per share, as on 09:51 am New York Time, USA (GMT-4) as of 8th 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.
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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