Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eveready Industries India Ltd (BOM:531508, Financial) reported satisfactory profitability with EBITDA and PAT increasing by 14.2% and 18.5%, respectively.
- The company is investing INR180 crores to set up an alkaline battery plant with a capacity of 360 million units, indicating a strong focus on future growth.
- Eveready Industries India Ltd (BOM:531508) holds a significant market share of over 53% in the battery segment, with a notable 67% increase in value terms for alkaline batteries.
- The LED lighting segment showed positive EBITDA at 3.1%, reversing a breakeven situation from the previous year.
- The company is actively expanding its distribution channels, including modern retail, e-commerce, quick commerce, and institutional sales, to boost growth in the coming quarters.
Negative Points
- Revenue for Q1 FY25 was INR349.4 crores, down from INR363.6 crores in the same period last year, indicating a decline.
- The carbon zinc battery segment, which constitutes nearly 90% of the battery market by value, remained muted due to weak rural demand.
- The battery-operated flashlight revenue degrew by 3%, reflecting a slowdown compared to the previous year's trends.
- The lighting segment showed only marginal growth of 1.4% in revenue due to value erosion, despite volume growth in various categories.
- The company faced challenges in revamping its distribution network, which impacted operations, although these issues are being addressed.
Q & A Highlights
Q: Sir, could you highlight the rationale behind the CapEx for the new alkaline battery plant and the market size for alkaline batteries?
A: Alkaline batteries are growing faster than traditional carbon zinc batteries. The market size is around 350 million batteries, and we are currently selling about 60 million annually. The new plant will help us meet the growing demand and reduce costs by about 10% compared to importing.
Q: What is the gross margin differential between alkaline and carbon zinc batteries?
A: The margins are similar, but premium alkaline batteries have about 5-6% higher margins compared to the best carbon zinc offerings. Value alkaline batteries have margins similar to popular carbon zinc batteries.
Q: Can you provide the segmental EBITDA and revenue numbers for batteries, flashlights, and lighting?
A: For the quarter, batteries contributed INR39 crores to EBITDA, flashlights INR9 crores, and lighting INR2 crores. Revenue-wise, batteries accounted for 60%, flashlights 17%, and lighting 23%.
Q: What is the expected growth rate for the alkaline battery market, and how does it compare to carbon zinc?
A: The alkaline battery market is growing at a high double-digit rate, around 20%, while the carbon zinc market is stagnant. Globally, alkaline batteries constitute a higher percentage of the total battery market compared to India.
Q: What are the plans for the lighting segment, and when do you expect it to achieve high single to low double-digit EBITDA margins?
A: Our focus is to make the lighting segment breakeven this year, with a target of INR400 crores in turnover. Achieving mid to high single-digit EBITDA margins is a two- to three-year journey.
Q: What is the current capacity for carbon zinc and alkaline batteries, and what are the plans for the new alkaline battery plant?
A: We currently have no in-house alkaline battery capacity and import them. The new plant will have a capacity of 360 million units, and we expect to reach half of this capacity in three to four years. The investment will be funded partially through internal accruals and borrowed funds.
Q: What is the status of the KKR arbitration, and are there any plans to sell real estate assets?
A: The arbitration has been deferred to November. We are not currently planning to sell any real estate assets due to an embargo. Any future decisions will depend on the operational needs of the company.
Q: What is the market size for alkaline batteries, and what is the mix between OEM and replacement markets?
A: The market size is around 300 million units, with a value of INR300 crores. The mix is roughly 50-50 between OEM and replacement markets.
Q: What is the expected payback period for the INR180 crores investment in the new alkaline battery plant?
A: We expect a payback period of five to six years, with the plant becoming operational within a year.
Q: What is the outlook for the battery-operated flashlight segment, and how does it compare to rechargeable flashlights?
A: The battery-operated flashlight segment is declining due to consumer preference for rechargeable flashlights. Currently, battery-operated flashlights account for two-thirds of our sales, while rechargeable flashlights account for one-third.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
