EVEREADY - Eveready Industries India Ltd. Share Price

Eveready's management provided a cautiously optimistic outlook, citing improved rural demand and middle-income consumption despite macroeconomic challenges like inflation and high commodity prices. Key points include:

Batteries: Focus on scaling alkaline battery production (11% market share, up from near-zero) via a new Jammu plant (Rs.180 crore investment), expected to boost margins by 8"“10% through cost efficiencies. The alkaline segment grew 90.8% YoY in Q3, with long-term aspirations to match the overall 53% market share of carbon zinc. Carbon zinc remains stable with 7.6% revenue growth.

Flashlights: Rechargeable flashlights (30% market share) are prioritized, with growth driven by BIS certification to curb unorganized players. Revenue grew 9.6% in Q3, supported by new products and channels (e-commerce, modern trade).

Lighting: Marginal growth amid pricing pressures; expansion in professional luminaires and alternative channels to offset challenges.

Financials: Q3 revenue rose 9.4% to Rs.333.3 crore, EBITDA up 18.7%, PAT up 56%. YTD EBITDA/PAT margins at 12.1%/6.9%. A&P spend at 11% of revenue, likely stabilizing as sales scale. Debt reduced to Rs.245 crore, targeting Rs.225"“230 crore by FY25-end, with Rs.180 crore CAPEX partly debt-funded.

Other Initiatives: Jammu plant aims for Rs.100 crore revenue initially, scaling to Rs.400 crore. Gross margin target ~45% with commodity cost moderation. Leadership succession planning underway.

Question 1: "So, my first question is on the rechargeable batteries. So, we've seen a very strong growth in this segment. Would you want to highlight key drivers for this and also what's the update on BIS for rechargeable batteries?"
Answer: The growth in rechargeable flashlights (not batteries) is driven by market shifts toward rechargeables, which now constitute 70% of the flashlight market. Unorganized players dominate this segment, but mandatory BIS certification (gazetted recently) is expected to curb unethical practices, redirecting demand to organized players like Eveready. Growth is anticipated post a 6-month adjustment period for compliance.

Question 2: "Secondly, your market share in alkaline batteries has now doubled to almost 11%. So, what led to such a market share swing? [...] once the Jammu factory gets commissioned, what could be the savings in terms of your manufacturing cost for both Pro and Ultima range of alkaline battery?"
Answer: Market share growth in alkaline batteries (from near-zero to 11%) stems from focused marketing, distribution, and the Ultima Pro/Ultima brand refresh. The Jammu plant (Rs. 180 crore capex) aims to reduce costs via domestic production (avoiding import duties) and operational efficiencies. Margins may improve by 8"“10%, with potential state fiscal benefits.

Question 3: "And lastly, what is the plan for the debt repayment?"
Answer: Debt repayment targets Rs. 225"“230 crore by FY25-end (vs. Rs. 245 crore currently). Jammu plant financing includes 75% debt and 25% internal funds. Debt may peak at Rs. 325"“330 crore during construction before gradual repayment.

Question 4: "What would the annual revenues that we can expect? [...] is this totally financed through the debt [...]?"
Answer: The Jammu plant is projected to generate Rs. 100 crore revenue initially, scaling to Rs. 400 crore annually. Financing is 75% debt and 25% internal funds.

Question 5: "Your market share in alkaline batteries has now doubled to almost 11%. [...] what could be the savings in terms of your manufacturing cost [...]?"
Answer: (Reiterated) Domestic manufacturing in Jammu will reduce costs via duty savings and efficiency. Margins could improve 8"“10%, supplemented by potential state tax benefits.

Question 6: "Could you give revenue bifurcation between battery, flashlight, and lighting for Q3?"
Answer: Q3 revenue split: batteries (65%), flashlights (11%), lighting (23%). YTD EBITDA margins: batteries (14%), flashlights (4%), lighting (flat).

Question 7: "In the recent budget, the import duty on zinc was rationalized. Will this benefit COGS?"
Answer: No impact, as the duty cut applies to zinc ash/scrap, not virgin zinc used in production.

Question 8: "How should investors view the reappointment of Mr. Saha for six months?"
Answer: The extension focuses on executing succession planning and consolidating recent financial gains. A formal leadership transition announcement is expected later.

Question 9: "What is the sustainable gross margin outlook?"
Answer: Target gross margin is 40%, subject to commodity price trends. Current margins (~38"“39%) may improve with stable zinc costs and alkaline battery scaling.

Question 10: "What are the growth drivers for the alkaline battery segment?"
Answer: Growth is driven by rising usage in high-drain devices (e.g., medical tools, automated systems) and India's low alkaline penetration vs. global benchmarks. The Jammu plant will enhance cost competitiveness.