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.

Result Performance for the Year Ended 30 September 2021 (FY21)

• Net sales stood at $3,021.5 million in FY21, up 10.1% YoY because of organic growth.
• The organic net sales grew 7.3% YoY in FY21 primarily due to new distribution in both segments and across all categories, resulting ~3.9% rise. This was followed by increased YoY global demand contributing ~2.6% in FY21, led by higher battery sales earlier in the fiscal year and a rise in auto care sales throughout the fiscal year, and favourable pricing contributed ~0.8% to the organic increase
• The gross margin percentage on a reported basis was 38.4% in FY21 versus 39.4% in FY20. In addition, after removing the acquisition and integration costs, the gross margin was 39.6% in FY21, down 100 bps from FY20.

Source: Company Reports, Analysis by Kalkine Group

Key Update

On 15 November 2021, the company declared dividends on its common and preferred stock. Common Stock - a quarterly dividend of $0.30 per share, payable on 15 December 2021 as per the record of 30 November 2021. 7.50% Series A mandatory convertible preferred stock - a quarterly dividend of $1.875 per share payable on 15 January 2022 as per the record of 1 January 2022.

Outlook

The company anticipates organic revenue to report flat growth, with auto care growth and price action across all businesses offset by an expected fall in battery demand. Further, revenue will be negatively impacted by foreign currency headwinds of $20-$25 million at current rates. In addition, product input costs, rising raw materials, labor and transportation costs have increased rapidly over the past quarter. As a result, the gross margin headwinds of ~150 basis points based on current rates are expected. With the forecasted declines in battery volume in H1FY22, these inflationary cost pressures are expected to result in Adjusted earnings per share in the ambit of $3.00-$3.30 and Adjusted EBITDA between $560-$590 million.

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. Further, the risk of changes in the retail environment and consumer preferences also remain a significant concern. Moreover, it faces the risk of supply chain disruption due to its reliance on certain essential suppliers.

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 ~-16.76% and ~-11.10%, respectively. In addition, the stock is trading lower than the average of the 52-week high price of $52.8499 and the 52-week low price of $36.14.

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 increased ROE of 48.4% in FY21 versus 11.4% in FY20 and a higher fixed asset turnover ratio in FY21 versus the industry median.

Considering the higher battery demand, along with strong organic growth and decent outlook, we give a “Buy” recommendation on the stock at the closing market price of $37.24 per share, up by 0.13% as of 1^st December 2021.

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

Energizer Holdings, Inc. (ENR) is a part of Kalkine’s Global Fully Charged Report

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