Eveready Hikes Battery Prices To Boost Profit Margin

In an effort to maintain the profitability margin, Eveready Industries India has planned to increase the price of its batteries. The new prices will be applicable from April 1, 2014. The company is increasing the price of its pencil size batteries from Rs 5 to Rs 10 per strip of 10 batteries and the cost of D size batteries will go up by Rs10 per box of 20 batteries. After the increase in prices, the realisation of the company will increase by 3-8%.

The company operates in four different products segments namely batteries, which contribute 59% to the total operating revenue, Flash light and lighting that account for 34% of the total operating income and the rest comes from scrap and other product segments. 

The company increased the battery prices due to persistence rise in material cost and overheads expenses which is reducing the net profit margin of the company. Cost of material for the company has gone up to 53% of total operating income to Rs156 crore during Q3FY14 from 48% of total operating income of Rs127 crore in Q3FY13, while purchase of traded goods has increased to 21% of total operating income from 18% on a yearly basis. 

During the quarter, the company has recorded a considerable growth of 12% in its topline while EBITDA has shown an increase of 19% YoY to Rs 25 crore in Q3FY13 as compared to Rs 20 crore in Q3FY13. Its bottomline stood at Rs 4.53 crore during the quarter against Rs 1.8 crore in the corresponding quarter of previous year. On operational front, Eveready industries has shown an increase of 13% in the overall volume growth on yearly basis to 312 crore units in Q3FY14 against 276 crore units in Q3FY13 while export volume has increased by 55% YoY during the quarter.

At present the company is operating at 8.52% of EBITDA margin and after the price hike, it is expected to improve further. On March 20, 2014 the stock, at its current market price of Rs 43.5 per share, is trading at 31 times of its trailing 12 months earning.