EnerSys

ENS Details

EnerSys (NYSE: ENS) provides stored energy solutions for industrial applications. Also, it manufactures and distributes energy systems solutions and motives power batteries, speciality batteries, battery chargers, power equipment, battery accessories and outdoor equipment to customers internationally.

Result Performance for the Year Ended 31 March 2022 (FY22)

• Net sales stood at $3,357.3 million, up 12.7% YoY, primarily due to a 10% rise in organic volume because of solid demand and a 3% rise in pricing.
• Net earnings stood at $143.9 million, or $3.36 per diluted share, up 0.4% YoY. The muted response resulted from a lag in price recapture for increased costs led by inflation and supply chain constraints.
• Backlog increased to $1.3 billion, driven by solid market demand across segments.
• Returned $186 million to stockholders via share buybacks and dividends in FY22.

Source: Company Reports, Analysis by Kalkine Group

Key Update

On 25 May 2022, the company advised that its Board declared a quarterly cash dividend of $0.175 per share of common stock payable on 30 June 2022, as per the record date of 16 June 2022.

Outlook

The company is determined to take active pricing actions and anticipates seeing ongoing mixed benefits of the product. Meanwhile, the company is well-positioned to capitalize on solid market demand in exciting markets, driven by a robust order book and price stickiness. For Q1FY23, adjusted diluted earnings per share are anticipated to be between $1.10 and $1.20, while the gross margin is 21-23%. For FY23, the company expects capital expenditure to be ~$100 million.

Key Risks

The company operates in a competitive industry and are subject to pricing pressures. Further, the government reviews, inquiries, investigations, and actions could harm the business or reputation. Reliance on third-party agreements and derivative instruments could adversely impact the company’s business. The operating results could be affected by changes in the cost and availability of raw materials.

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

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

In addition, the stock is trading lower than the average of the 52-week high price of $100.23 and the 52-week low price of $59.95.

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation, and the target price so arrived reflects a rise of low double-digit (in % terms). Accordingly, a slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering organic solid volume growth and price action to drive financial outlook.

Considering the facts above, we give a “Buy” recommendation on the stock at the closing market price of $64.97 per share, up 2.54% as of 25 May 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues 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: 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