We met the management of Eveready Industries to understand the company's strategy going forward. Despite having
good brands like "Eveready" & "Powercell", the company has been struggling to achieve desired level of growth. Eveready
primarily deals in batteries, flashlights & lighting products with batteries contributing to ~60% of the revenue. Recently it
has launched a portable mobile charger. Excerpts of our discussion are as follows-
Revamping the distribution channel
Despite having a strong brand recall Eveready is struggling to
achieve desired level of growth. According to the management
this has been primarily because of gaps in the distribution
channel. The company is revamping its distribution channel &
has also started parallel distribution for the lighting & the newly
launched portable charger product. Parallel distribution means
that these products will have separate distribution outlets in
addition to the existing battery & flashlight outlets.
New products on the anvil
Eveready had recently launched 4 variants of portable chargers
used for powering mobile, tablets & gaming devices among others
ranging between INR 1200- 3200. The company has plans to launch
products such as Wall Mounted Light Fittings, Rechargeable fan
with embedded light, Radio & Luminous products. The focus going
ahead is on the rechargeable products. Considering the severe
power-cut situation in the country, Eveready's rechargeable
products may see a good traction.
Revenue from New products to aid profits going ahead
The per unit realization from the current product portfolio is low.
Consumer resistance is also witnessed for price increases because
of easy availability of substitutes. The newly launched portable
charger is ranged between INR 1200-3200 & margins are also
higher compared to the current product portfolio because of good
demand, absence of competition from the organized/ branded
segment. Going ahead, major product launches are value added
products which will aid margins. The management is targeting
revenue of INR ~5 bn in 3 years from these products.
Focus on Debt Reduction
The standalone debt & interest cost of Eveready is ~INR 2.76 bn &
~INR 0.36 bn respectively at the end of FY12. With improvement in
EBITDA & cash flows the company aims to repay ~INR 0.4 bn & INR
~0.6 bn through cash profits in FY13 & FY14 respectively. It aims
to reduce its debt & interest cost to ~INR 1.5 bn & INR 0.2 bn
respectively in 2-3 yrs. The company also owns ~35 acres of
disposable land (at Hyderabad & NCR) which it is willing to sell
after the recovery in the property prices.
Outlook & Valuation
Currently Batteries & Flashlights contribute 80% of the total
revenue of Eveready. Digitization & consequent use of 2 remotes
should increase its AAA battery sales. Going forward, with
improvement in distribution channel, sales from other divisions
should also pick up. Our outlook on smart phones & tablets is
robust & hence we believe that demand for the portable charger
should go up. The company is targeting revenue of INR 15 bn in
FY16, CAGR of 11% from FY13E to FY16E. Though the company has
INR ~2.76 bn of debt but there is also a cushion from ~35 acres of
disposable land. Currently the stock is trading at a P/E of 18x its
FY13E EPS of INR 1.
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