Motilal Oswal's research report on Eveready IndustriesEveready Industries’ (EVRIN) 4QFY16 revenue grew moderately by 3% to INR2,833m (vs. our estimate of INR2,793m), on account of a flattish growth in the battery business and decline in flashlights, which was compensated by a healthy growth in the LED business. EBITDA de-grew by 39% to INR137m (vs. our estimate of INR223m), while EBITDA margin declined by 220bp to 4.8% (vs. our estimate of 8%), mainly due to a mark down of LED bulb inventory and higher advertisement & promotional spend. According the management, there was a sharp decline in LED bulb prices in 4QFY16, which led to the mark down of old LED bulb inventory (INR45m). Adjusted PAT de-grew by 51% to INR48m (vs. our est. of INR87m). In view of the sluggishness in the battery business, we are lowering our FY17/18 revenue estimates by 1%/3% and our FY17/18 EBITDA estimates by 8%/8% in order to factor in the impact of fixed costs. We are also lowering our FY17/18 PAT estimates by 19%/17% to factor in the higher depreciation and interest expenses on account of the new capex, which will be partly offset by benefits from the new plant location. We expect 16% revenue CAGR and 190bp EBITDA margin expansion over FY16-18, driving 39% PAT CAGR. We maintain Buy with a target price of INR335 (37% upside). For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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