Panasonic Energy India Ltd

Panasonic Energy India Company Limited was  established in the year 1972 as Lakhanpal National Limited.

It is one of India's largest manufacturer of dry cell batteries .The company is headquartered in Vadodara in Gujarat .It has 2 manufacturing plants-one each in Vadodara & Pithampur (M.P)

 Panasonic Energy India holds the unique distinction of being the only battery manufacturers in India with complete Eco-friendly dry battery range.

The Company operates in three businesses: zinc carbon batteries, alkaline Batteries and flashlights. Zinc Carbon batteries presently account for most of the revenue.

The Company operates under the brand Panasonic.

Promoter :The Company is a part of  the Global  Panasonic Corporation,(holds 51% stake )manufacturer of audio-visual equipments, home appliances, electronic components, automotive electronics and environmental systems. Indian promoters (Lakhanpal group) hold 7.06%.

Dry Cell Battery Market in India:

The Indian market for Dry Cell Battery is now estimated at  2.2  billion  pieces by volume and Rs. 14 billion by value. The battery market has only a few players.

Market share:

Eveready 46%

Powercell ( part of Eveready) 5%

Nippo 30%

Panasonic 16%

Others 3%

The demand drivers and the potential offered by the presently low-consuming Indian market 

will continue to offer major potential for growth. 

Per Capita consumption:

India is one of the lowest consumers of batteries  with an average annual per capita consumption of 2. 

Comparitive figures for other nations are as below:

India: 2

Sri Lanka: 4.5

Brazil : 5

European Union:7

USA: 8

Japan :  20

Size wise Segments:

D Segment- Torchlights and radio- largely in rural India

AA segment-Remote Control , clocks, LED flashlights – both rural & urban

AAA segment- smaller size devices 

The segment pattern within the market has undergone change during the recent

 past as consumers shifted from the more expensive D size batteries to AA size

Battery category & % of market :

D  ----25%

C ---- 0.5%

AA ----- 67.3%

AAA ---- 7.2%

Technology wise segments:

The split of technology within the dry batteries market remained constant 

with zinc carbon batteries virtually possessing the entire market with 98 per cent share.

The alkaline batteries have minimal share of the market at 1% and are present in

only some premium urban outlets.

Rechargeable batteries, which have the balance 1% of the market seems to have

made its mark on a loyal customer base, but remaining stagnant.

Financials:

Equity : Rs.7.50 cr

Debt: Nil

Fixed deposits :Rs.16.17 cr ( as of March 31, 2010)

Year ended March 31, 2011:

Revenue ( nett of excise) : Rs.175.92

Profit before tax:: Rs.7.81

Profit after tax: Rs.5.50

EPS: Rs.7.34

Cash EPS: Rs.11.15

Dividend per share: Rs.2

Current market price: Rs.65

Market Cap: Rs.48.7 cr

EV: Rs.32.5 cr

Key positives:

1)                

1)   A growing need for portable power

2)      The advent & growing acceptance / requirement of a  number battery operated gadgets

3)      Batteries address everyday use and have enjoyed a non-cyclical demand . Demand has been 

largely untouched  during the past general downturns.

4)      Non cyclical demand ( to a large extent)

5)      Tremendous growth in Flashlights over the past 3 years to drive battery usage.

6)      The company is operating at about 50% of installed capacity and therefore there does not seem

 any immediate need for capex.

7)      Recently the company has made an amendment through a special resolution in its Memorandum

 of Association to include trading in Pansonic brand Digital camera, AV equipment, security cameras

, home appliances,beauty care personal products & Projectors. Initially, the company is expected to 

start with Digital cameras.

Key negatives:

1)      Dry cell battery market in India has been stagnant with a year over year growth of barely 1%.

2)      Large employee base of about 800. The company has been addressing this over the last 3 

years with VRS schemes.

3)      Price of the key raw material- zinc have been reasonably strong, though the impact of price 

rise in zinc has been cushioned by the appreciation of the INR vis a vis USD.

Key price catalysts:

1)      Growth in consumption in the Indian dry cell market

2)      Panasonic growing faster than competitors 

3)      Greater clarity on plans related to trading of Panasonic items ( mentioned above)

At the current market price of Rs.65, the company is available at an Enterprise Value of  less than 33 cr 

.The downside seems limited and more in the nature of the stock price being sterile . 

It presents a safe investment opportunity with decent prospects over a 18-24 month perspective. 

At the time of writing this report, the author /his family have an investment interest in the stock mentioned above. Under no circumstance does the information in this report represent a recommendation to buy or sell the above-mentioned stock.  This report has been prepared and issued on the basis of publicly available information, internally developed data & other sources believed to be reliable. This is just a suggestion solely for information purposes and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Readers using the information contained herein are solely responsible for their actions and are advised to satisfy themselves before making any investments.