This report is an updated version of the report published on 11 November 2022 at 2:58 PM (PDT)

EnerSys

ENS Details

EnerSys (NYSE: ENS) provides stored energy solutions for industrial applications and manufactures & distributes a range of batteries for consumer use.

Financial Results for 2Q’FY23

• Net sales of the company increased to USD899 million, including (USD45) million FX impact, up 14% YoY as reported and up 19% YoY in Constant Currency.
• The rise in net sales was primarily due to a 9% rise in pricing and a 10% rise in organic volume. 2Q’FY23 is the second highest quarterly revenue in history, despite absorbing ~USD45 million of FX headwinds
• It reported USD1.4 billion of backlog, up 38% YoY, primarily driven by robust demand and order trends across all segments.
• Launched NexSys® customer day featuring TPPL and lithium-ion line tours

Outlook

The company expects a dynamic macro environment with FX headwinds and European utility inflation to continue. The order book is expected to remain solid, benefiting from cycle-independent. For Q3FY23, the company anticipates adjusted diluted earnings per share in the ambit of USD1.20-1.30, indicating sequential volume and price/mix improvement, supportive demand trends and a healthy backlog. Further, it projects a gross margin between 21% - 23%. For FY23, the capital expenditure is expected to be ~USD100 million.

Key Risks

A slowdown or adverse economic conditions could adversely impact the business. The company continues to operate in a dynamic macro environment with potential forex headwinds and the impact of Europe utility inflation.

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

Stock Recommendation

Over the last one month, the stock has given a return of ~31.18%.

The stock has been valued using EV/Sales multiple-based illustrative relative valuation, and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average), considering fall in Cash and cash equivalent and slight slowdown in backlog in Q2FY23.

Considering the resistance, the Fed’s latest announcement, current trading levels, risks associated, and volatile market conditions on the back of rising interest rates, a ‘Sell’ rating is assigned to the ‘ENS’ at the current market price of USD 78.40 (as of 11 November, at 8:20 AM PST).

Technical Overview:

Daily Price Chart

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

EnerSys (ENS) is a part of Kalkine’s Global Fully Charged Product

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for share price chart and all other data such as stock price performance is based on November 11, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Disclaimer

Kalkine New Zealand Limited is a Financial Advice Provider (“FAP”) and is authorised by a Transitional FAP license issued by Financial Markets Authority (“FMA”) to provide financial advice. Kalkine provides only general financial advice through its research reports following a person becoming a member. The reports contain buy/sell/hold and other recommendations in relation to equity financial products. The recommendations and opinions [on this website] / [in this report] do not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions. If you act on the advice in the research reports, you may have to pay fees, expenses or other amounts (but not to Kalkine).  Further information about the complaints and dispute resolution process, as well as information about Kalkine’s duties are available on Kalkine’s website.  Please read our Financial Advice Provider (FAP) disclosure statement and Complaints Handling Guide, which are available on the website.