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  • Stock recommendation: Eveready Industries Ltd - BUY - TP Rs.322

    Publish Date: 27th July, 2018

    Result Update

    EIIL Q1FY19 result was higher than our estimates; company posted operating margin expansion following the immense disappointment in the previous quarter, when the company reported EBITDA loss. Management is able to reassure (during the course of our interaction) that most of the challenges are close to get sorted and situation across verticals have largely stabilized now.

    Key Highlights

    • EIIL reported 13.2% y/y revenue growth, reported at Rs 3.8 Bn in Q1FY19 driven by LED and home appliances segment. Battery business reported 8.6 y/y growth in the quarter
    • Operating margins have recovered after company reporting operating loss in the preceding quarter. This makes us feel more confident about the company's ability to protect margins; and that the company is less vulnerable to fluctuations in the 1/ input prices and 2/ costs related to new business areas viz. consumer appliances, confectionary and FMCG.

    Valuation & outlook

    Maintain FY19/20 forecasts and DCF assumptions; we recommend 'BUY' with unchanged target price of Rs 322. Despite attractive upside potential, we expect stock to remain under pressure in the short term, susceptible to 1/ further developments in the CCI event and 2/ reversal in sales momentum.


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