Oppenheimer analyst Noah Kaye reiterated an Outperform rating on the shares of EnerSys (NYSE:ENS) and raised the price target from $110 to $119.
The analyst said ENS investor day provided a blueprint for doubling EPS within four years through accelerating growth and improving mix/OpEx leverage.
The company targets FY23-27 revenue CAGR of 8-10% and cumulative FY24-27 free cash flow of $1.2 billion – 1.6 billion at 95% conversion and $100 million -120 million average annual capex.
Citing need for supply security and design control, ENS announced an MoU with Verkor to develop a domestic Li-ion gigafactory.
The analyst believes the companies are contemplating $500 million capex, with government support providing a significant share of investment.
The analyst noted that ENS cited reduced spot procurement and freight costs, enabling continued sequential margin improvement through FYE24.
According to the analyst, management sees new small cell and extended backup offerings driving 6-8% topline CAGR through FY27.
The analyst views faster innovation cycles and higher topline CAGR can drive future re-rating, while viewing operating leverage as key to the stock nearer term.
The analyst sees ENS as a differentiated provider of stored energy solutions for specific industrial applications that is transitioning into a full provider of power solutions.
The analyst opined that ENS is well-positioned to come through near-term macro challenges and move forward on capturing key growth opportunities in transportation, telecom, and other markets.
Price Action: ENS shares are trading lower by 1.043% at $104.72 on the last check Friday.