Recommendations From Non-Durable Household Product Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.

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READY FOR CHARGED-UP PERFORMANCE 

HERE IS WHY
Entered into a JV with Universal Wellbeing
Foray into confectionery market
Robust financials 

Eveready Industries India Ltd (EIIL) is an FMCG company manufacturing and marketing dry cells and rechargeable batteries; flashlights and lanterns; LED bulbs and luminary devices. The company is a market leader in the batteries segment, commanding over 50 per cent of India's market share and holding 75 per cent of India's organised flashlights market. EIIL has also entered the market for home appliances and packet tea. 

EIIL has forayed into confectionery market through its brand name “Jollies”. It is expected that this fast-growing fruit chew segment will double in the next 3 to 4 years. The company will become a significant player in this segment by making this under-penetrated category available across rural and urban India through its robust distribution network. 

In the appliances division, EIIL has expanded in the northern and eastern parts of the country. The company has also entered into a joint venture with Indonesia-based Universal Wellbeing Pte Ltd for manufacturing or importing and marketing of FMCG in India. EIIL would acquire 30 per cent shares of the JV, while 70 per cent would be acquired by the Indonesian firm. Universal Wellbeing is one of the leaders in the FMCG market in South-East Asia and manufactures and sells products in fabric and household care, personal care, skincare, and foods and beverages 

On the financial front, the net sales of the company increased by 3.51 per cent to Rs398.25 crore in the second quarter of FY18, as against Rs384.73 crore in the same quarter of the previous year. The company’s PBDT increased 36.52 per cent to Rs52.86 crore in the second quarter of FY18 on a yearly basis. The company’s net profit also increased drastically by 41.88 per cent to Rs36.35 crore in Q2FY18, as against a net profit of Rs25.62 crore in the second quarter of the previous year. 

On an annual basis, the company’s net sales increased 7.21 per cent to Rs1,418.69 crore in FY17 on a year-onyear basis. The company’s PBDT increased 46.64 per cent to Rs119.64 crore in FY17, as against Rs81.59 crore in the previous fiscal. The net profit of the company rose 84.86 per cent to Rs93.63 crore in FY17, as against Rs50.65 crore in the previous fiscal. 

On the valuation front, the company's stock trades at a PE ratio of 31.94x, as against its peer Panasonic Energy India (74.89x) and Indo National (25.89x). The company’s return on equity (RoE) and return on capital employed (RoCE) stood at 37.84 per cent and 30.31 per cent, respectively. The company has a debt-to-equity ratio of 0.68x. 

Over FY15-17, the company's PAT has grown at a CAGR of 119.3 per cent. The company is weighing on its LED segment, where it has launched new products in the luminous space. Also, the new businesses will be the key drivers of growth going forward. We recommend our reader-investors to BUY the stock.