Buy Eveready Industries India; target Rs 310: Kotak Securities

Kotak Securities has a buy call on Eveready Industries India with a target price of Rs 310.

The current market price of Eveready Industries India is Rs 190.20.

Time period given by the brokerage is one year when Eveready Industries India price can reach the defined target.

Investment rationale by the brokerage
EIIL balance sheet likely to get de-leveraged post monetization of Chennai land for Rs 100 crore. Management sounded confident about 1/ monetizing other non-strategic assets in the near term as and 2/ strengthening balance sheet further, achieving debt free status in FY20.

As per management, after a prolonged period of disruption in the batteries & flashlight business, sales have now started to pick up and is expected to build further momentum going ahead. BIS compliance would lead to the reduction in imports of cheap Chinese batteries, which could meaningfully benefit the domestic industry.

Operating margins are expected to recover in FY19/FY20 on back of improved volumes in the core business and normalization in costs overheads in the appliances/ confectionary business.

Valuation & outlook: We believe that stock is currently trading attractive at FY20 PER of 12.1x and EV/EBITDA of 9.2x. We maintain FY19/20 forecasts and DCF assumptions, we recommend ‘BUY’ with un-changed target price of Rs 310.