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Mar 08, 2022

ENS:NYSE
Investment Type
Mid - Cap
Risk Level
Action
Rec. Price ($)

 

Company Overview: EnerSys (NYSE: ENS) delivers stored energy solutions for industrial applications. ENS also distributes and manufactures automotive power batteries, battery charges, speciality batteries, and other battery products. The company’s business segments include Energy Systems, Motive Power, and Specialty.

­­­­­­ENS Details

Material Business Updates

Figure 1: Latest Media Releases

Source: Company Reports, Analysis by Kalkine Group

Historical Financial Trend:

ENS illustrated sustainable historical growth until FY21 when COVID-19 impact was considerable while keeping the value proposition intact. The normalized EBITDA has taken the pace after being beaten down in FY19. Operating revenues grew at a 5.9% CAGR (FY17 – FY21).

Figure 2: Historical Financial Overview

Source: Company Reports, Analysis by Kalkine Group

Third Quarter FY22 Performance:

Figure 3: Quarterly Performance

Source: Company Reports, Analysis by Kalkine Group

Full-Year FY21 Performance:

Figure 4: Annual Performance

Source: Company Reports, Analysis by Kalkine Group

Top 10 Shareholders:

The top 10 shareholders together form ~45.13% of the total shareholding. BlackRock Institutional Trust Company, N.A. and The Vanguard Group, Inc. holds a maximum stake in the company at ~­­­10.27% and ~9.55%, respectively.

Figure 5: Top 10 Shareholders

Source: Analysis by Kalkine Group

Key Metrics:

ENS’ robust margins and strong bottom-line highlighted the resilience of the business’ energy systems and motive power segments. The firms hold reasonable liquidity to fund significant megatrends, for instance, 5G buildout, household energy storage, and EV charging.

Figure 6: Key Financial Metrics

Source: Analysis by Kalkine Group

Outlook:

Figure 7: Long-term Opportunities and Segment Prospects

Source: Company Reports, Analysis by Kalkine Group

Key Risks:

The Automotive industry is highly affected by semiconductor shortages which may contract the demand for the Motive Power segment. All the present segments have faced considerable challenges from the stringent labour supply.

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

Stock Recommendation:

ENS has delivered 3-month and 6-month returns of ~-9.753% and ~-17.676%, respectively. The stock is trading below the average of the 52-week high price of US$68.23 and the 52-week low price of US$104.47, 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 with an upside 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 resilient and diversified top-line and prudent liquidity position. For valuation, a few peers like AZZ Inc (NYSE: AZZ), American Superconductor Corp. (NASDAQ: AMSC), LSI Industries Inc (NASDAQ: LYTS) and others have been considered. Considering the current megatrends, decent liquidity position, top-line support, launch of Enersys® ABSL™ Lithium-ion Batteries, current trading levels, and potential upside as indicated by the valuation, we give a “Buy” recommendation on the stock at the closing market price of $69.49, as of 08 March 2022, down by ~0.63%. Markets are currently trading in a highly volatile zone due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

ENS 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.


Disclaimer-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

Kalkine Media LLC, an affiliate of Kalkine Equities LLC, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.