Exide Industries Ltd. share price target

Exide Industries Limited (EIL) is a leader in storage battery business with a market share of 60% in India. Its segment includes automotive and industrial lead - acid batteries. Q1FY21 revenue de-grew by -44%YoY led by subdued Auto production impacting OEM Volume. However strong pend up demand from the aftermarket sales offset further decline. EBITDA margin contracted by 560bps as the benefit of the lower lead price was overshadowed by loss of production....

EIL has a healthy balance sheet that is debt free in nature and surplus cash of ~| 170 crore as of FY20P. It has a capital efficient business model with nearly ~15% RoCE, ~>20% RoIC's and controlled working capital cycle (<90 days). It has also been a consistent CFO and FCF positive company with present CFO & FCF yield presently placed at ~7% & ~4% respectively. These attributed place EIL in good stead making it aptly capable to tide over...

Further, FY21 should see continued benefit of mix (lower OEMs) and lead prices. We have downgraded our EPS by 4.5%/1.4% for FY21/FY22E to factor in weaker 1QFY21 revenues/EBITDA/PAT declined 44%/64%/80% YoY to INR15.5b/ Revenue declined due to the lockdown impact on auto/non-auto segments and the OEM/replacement businesses. The company is focussing on cost control measures and technology upgrades to We have downgraded our EPS by 4.5%/1.4% for FY21/22E to factor in the lower revenues, better mix and lower lead prices. structure remains largely duopoly, EXID is the largest lead acid battery manufacturer in India with leadership in Auto OEMs and the replacement segment. However, EXID has largely caught up with competitors by investing in technology and by being more proactive in customer service and plugging gaps EXID should improve its market share as economic recovery led demand would come in from AUTO OEMs and the Industrial segment.

Exide's net sales were 12.1% lower than expected; nevertheless, EBITDA margin was 137bps higher than our forecast. Net sales decreased 20.9% YoY to Rs20.5 bn mainly due to weakness in Auto OEM segment. Further, nationwide lockdown in late March affected Q4FY20 sales. EBITDA fell 27.6%% YoY to Rs2,702 mn representing an EBITDA margin of 13.1% (-121bps YoY). Exide's net profit declined 20.3% YoY to Rs1,680 mn. Its...

We maintain a constructive view on EIL for its technological edge, debt free B/S, strong cash generation track record (present CFO yield at 6.6%) but feel the stock is fairly valued at CMP. Hence, we downgrade it to HOLD, valuing it at | 170 (SOTP basis), (battery business at | 125 i.e. 12.9x P/E on FY22E...

Furthermore, FY21 would see the continued benefit of the mix (lower OEMs) We upgrade our EPS by 8%/10% for FY21/FY22E to factor lower revenues, a better mix, and lower lead prices. Maintain with TP of ~INR205 (~16x S/A Mar22 EPS + INR21/sh for the Life Insurance remains largely duopoly, Exide is the largest lead acid battery manufacturer in India, with leadership in the Auto OEM and Replacement segments. However, EXID has largely caught up with competitors by investing in technology, being more proactive in customer service, and plugging the gaps in the product portfolio, among other EXID plans to improve its market share as economic recovery has resulted in demand from the Auto OEM and Industrial segments. We upgrade our EPS by 8%/10% for FY21/FY22E to factor lower revenues, a better mix, and lower lead prices. We prefer EXID as it offers superior risk-reward considering its market leadership, technology alliances, backward integration, and better mix.

Replacement demand key to traverse sluggish growth phase Aftermarket i.e. replacement segment accounts for ~60-65% of channel mix for battery manufacturers, including EIL. The OEM segment, which forms a further 25-30% of overall demand, has been seeing prolonged correction over the past ~15 months, thus weighing on revenues even for ancillary companies. With a meaningful recovery in OEMs still some way away (H2FY21E), a sustained performance on the replacement side would be key, going forward. Aftermarket segment continues to be the beneficiary of a...

3QFY20 revenues/EBITDA/PAT grew -3%/2%/38% YoY to INR24.1b/ Revenue growth was driven by strong volume growth in the auto aftermarket business, UPS batteries and export market. However, weakness in OEM business, telecom and infrastructure batteries along with impact of lower lead prices resulted in ~3% revenue decline. Higher other income and lower tax boosted YoY PAT growth by ~38% to ~INR2.1b Demand was weak from automobile OEM, telecom and other infrastructure segments. The company is focused on cost control measures and technology upgrades While the industry structure remains largely duopoly, EXID is the largest lead acid battery manufacturer in India with leadership in auto OEMs and the We downgrade our EPS estimates by ~4% for FY21 to factor in the lead price The stock trades at valuations of 18.2x/16.4x FY21/FY22E consol. Further, we expect migration in the replacement segment from the unorganized sector to organized players like EXID and AMRJ, driven by reforms such as GST and lower corporate tax rates.

Exide Industries Limited (EIL) is a leader in storage battery business with a market share of 60% in India. Its segment includes automotive and industrial lead - acid batteries. Q2FY20 revenue de-grew by -4%YoY owing to negative 2W industry growth of -17%. However strong sales from the aftermarket batteries & home invertor offset further decline. EBITDA margin improved by 160bps due to softening of lead price by -3.3YoY. Adj. PAT grew by 46%YoY....

Steady aftermarket to lend support; stable lead prices to help! Consumable providers such as battery makers, including EIL, realise ~5060% demand from the replacement market. Strong OEM sales in FY16-19 and short replacement cycles are, thus, expected to stand these companies in good stead during the ongoing slowdown in fresh vehicle sales. Margins at battery manufacturers have a close correlation with pricing and outlook for key raw material, viz. lead, with the impact felt with a quarterly lag. Batteries being a largely commoditised product, companies including Exide then pass on the pricing variation to end consumers. Lead prices rose ~7%...