Energizer Holdings, Inc.

Company Overview: Energizer Holdings, Inc. (NYSE: ENR) is one of the largest manufacturers, marketers and distributors of household batteries, speciality batteries and lighting products in the world. Its brands, such as Energiser and Eveready, are marketed and sold globally.

­­­­­­ENR Details

Material Business Updates

Accelerated Share Repurchase Program: On 11 August 2021, ENR announced entry into a repurchase agreement, valuing $75 million of its common stocks as a part of the accelerated share repurchase program, in collaboration with JPMorgan Chase, National Association.

Successful Debt Raising: On 23 June 2021, ENR announced the successful completion of EUR650 million senior notes offering – 3.500% senior notes due 2029, issued by Energizer Gamma Acquisition B.V. (Wholly-Owned Subsidiary of ENR).

Historical Financial Trend:

ENR illustrated sustainable historical growth while keeping the value proposition intact. The Operating revenues have been growing since FY16 with consistent growth in net income. Operating revenues grew at a 13.8% CAGR (FY16 – FY20).

Figure 1: Historical Financial Overview

Source: Company Reports, Analysis by Kalkine Group

Third Quarter FY21 Performance:

Figure 2: Quarterly  Performance

Source: Company Reports, Analysis by Kalkine Group

Full-Year FY20 Performance:

Figure 3: Annual Performance

Source: Company Reports, Analysis by Kalkine Group

Top 10 Shareholders:

The top 10 shareholders together form ~57.44% of the total shareholding. In addition, The Vanguard Group, Inc. and BlackRock Institutional Trust Company, N.A., hold a maximum stake in the company at ~­­­9.71% and ~9.13%, respectively.

Figure 4: Top 10 Shareholders

Source: Analysis by Kalkine Group

Key Metrics:

Acquisition strategies, diversified product portfolio, and enhanced distribution reach resulted in healthy revenue growth over the past five years. However, due to moderate working capital requirements, the current ratio deteriorated but appears at elevated levels. In addition, ENR had stretched inventory days, partly funded by payables.

Figure 5: Key Financial Metrics

Source: Analysis by Kalkine Group

Outlook:

Figure 6: FY21 Estimate:

Source: Company Reports, Analysis by Kalkine Group

Key Risks:

Low Gross Margins: Amidst unfavourable economic conditions and significant demand moves, lower-margin product lines may overshadow the higher-margin products; already witnessed in Q3FY21.

The Threat of Substitution: Concerns over increased rechargeable products may outweigh the use of battery cell products; hence, ENR has increasing exposure to the risk of substitution.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Stock Recommendation:

ENR has delivered 3-month and 6-month returns of ~-10.549% and ~-19.239%, respectively. The stock is trading below the average of the 52-week high price of US$52.85 and the 52-week low price of US$37.81, indicating an accumulation opportunity. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in % terms). The company might trade at a slight premium compared to its peers’ median EV/Sales (NTM trading multiple), considering the upcoming battery peak season and resurgence in the global supply chain. For the purpose of valuation, few peers like Kimberly-Clark Corp (NYSE: KMB), Clorox Co (NYSE: CLX), Spectrum Brands Holdings Inc (NYSE: SPB) have been considered. Considering the upcoming battery season, worthy investment in working capital to cater for demand, steady growth prospects, and potential upside as indicated by the valuation, we give a “Buy” recommendation on the stock at the current market price of $37.99, as of 20 September 2021, down by ~1.61%.

ENR Daily Technical Chart (Source: REFINITIV)

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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