MOSL: EVEREADY INDUSTRIES (Buy)-Segments recover from GST-related hiccups

Eveready Industries: Segments recover from GST-related hiccups

(EVRIN IN, Mkt Cap USD0.4b, CMP INR378, TP INR458, 21% Upside, Buy)

• Revenue marginally below estimate; records a miss on PAT too: EVRIN’s revenue rose 12.2% YoY to INR3,696m (est. of INR3,792m) in 3QFY18. EBITDA margin shrunk 144bp YoY to 9.3% (est. of 10.0%), while EBITDA fell 2.9% YoY to INR342m (est. of INR375m) due to a significant rise of 200bp in other expenses (led by INR100m ad spends during the festive season in the appliances and lighting segment). Consequently, adjusted PAT grew 23% YoY to INR209m, lower than our estimate of INR253m. Turnover in battery and flashlights remained flat, while that in LED segment grew by 33% YoY.
• Newer segment to de-risk business model and drive growth: EVRIN expects to do a turnover of INR1b in FY18 in the appliances segment, and expects to grow by 50% YoY in FY19. While EBITDA loss stood at INR125m due to initial investments made in this business, EVRIN expects to achieve 12-14% EBITDA margin in the next 2-3 years. The company has recently entered into confectionary (fruit chew) segment with its brand Jollies, which should start contributing to growth from H2FY19. EVRIN plans to do this under the asset light model and will start rolling out products pan-India by May-June 2018. It has also recently entered into a JV with Indonesia’s largest FMCG conglomerate Wings Group – EVRIN will invest INR75m for a 30% stake in the JV and will leverage its distribution strength to market new products.