Shares of Eveready Industries moved higher by 9 per cent to Rs 170, hitting its fresh 52-week high, on the BSE on Tuesday after the company reported a strong operational performance in September quarter (Q2FY21).
In Q2FY21, the company's standalone operating EBITDA (earnings before interest, taxes, depreciation, and amortization) margin expanded to 20.3 per cent from 9.1 per cent in Q2FY20 due to a better turnover mix towards more profitable segments of batteries and flashlights. This, coupled with lower employee cost, lower distribution cost, lower promotional spends and lower overheads as the various establishments of the company continued to be run in a restricted manner in the Covid-19 environment, enhanced profitability.
The company's net profit during the quarter more-than-doubled to Rs 58.02 crore as against Rs 18.38 crore in the corresponding quarter of the previous fiscal. Operating income, however, grew in single digit, at 7 per cent, to Rs 373 crore from Rs 348 crore during the quarter.
The management said the turnover for the quarter did recover part of the losses of the previous quarter - aided primarily by healthy turnover in the battery and flashlight segments - as the economy opened up more fully. The core segments of batteries and torches registered significant turnover increases over the corresponding quarter of the previous year attributable to a healthy demand coupled with a sharp reduction in cheap Chinese imports. In addition, battery and flashlight price increases, to mitigate the negative impact of rupee depreciation, aided turnover, it said.
On outlook, the management said the company's core categories of batteries and flashlights continues to witness a healthy demand given the sharp decrease in dumped imports from China and the disruptions caused to the unorganized market in the midst of the pandemic. The situation in the battery segment should continue to look positive as imports continue to remain low with the BIS standards having come into force - providing a level playing field to domestic manufacturers.
The flashlight segment is also likely to benefit as many of the unorganized gray market players may have been adversely impacted by cash flow constraints arising out of economic disruption. Furthermore, government's focus on restricting imports from China are likely to benefit both the segments. Given the outlook, the company is expected to maintain high operating margins in the forthcoming quarters, it said.