CMP TARGET PRICE Investment Horizon Recommendation Date
Rs.163 Rs.210 8-12 months Accumulate 03/01/2011
Exide Industries is the largest manufacturer of lead acid storage batteries in India with 25% revenue share. It dominates the branded automotive battery market with over 72% market share and industrial battery market with nearly 45% market share. Exide has manufacturing presence in India, Srilanka, UK, Singapore and Australia. Exide Industries Limited is engaged in manufacturing storage batteries from 2.5 ampere-hour to 15,000 ampere-hour. The Company is not only one of the leading manufacturers of Lead Acid Batteries in India and South Asia, but also is reckoned among the first five major companies in the global battery manufacturing industry.
the company’s foray into new areas such as Electric and Hybrid batteries for cars and two wheelers and in development of environmental friendly storage power alternatives would not only result in building up its strength for the present but also lead to being recognized as a major player in the new generation storage power solutions industry. telecom. CEIL and Power Safe brands and in international market under CEIL.
. supported by 4 regional offices and 28 branch offices. It is one of the five companies in the world which has capacity to manufacture submarine batteries for Russia and Germany. infrastructure. information technology and agricultural sectors.600 Ah. It also exports batteries to the Middle East.5 Ah to 20. Index. It has a distribution network of 4000 outlets. Index & Sonic brands.
Exide’s strength lies in its technologically superior and high quality products coupled with a wide distribution and after sales network. Chloride and Index brands. In international market it sells products under Dynex. Industrial Batteries It manufactures industrial batteries in a wide range from 2. Industrial batteries cater mostly to the infrastructure sector such as railways. power plants. power. In India it sells products under Exide. telecom. Moreover. It manufactures two to three submarine batteries a year for India’s defence requirement. SF. The wide range of storage batteries ranging from 2. solar cells and other industrial segments including uninterrupted power supply. inverters and traction batteries. Japan and CIS countries. Sonic and Standard Furukawa brands and supplies to all car and two-wheeler manufacturers.Automotive Batteries In India the company markets the products under Exide. SF. Submarine Batteries The Company is also engaged in manufacturing of high-end submarine batteries.5 Ah to 15000 Ah capacities covers a broad spectrum of applications thereby giving it a definite edge in the automotive.
3 250.8 554.00 2005 2006 2007 Sales EBITDA 2008 PAT 2009 2010
RECENT FINANCIAL PERFORMANCE Exide Industries Ltd.5
1881.4 284.81 266.87 419.00 3.28 314.00 2.00 1.62 352.9 14.8
Total Income Total Expenditure PBIDT Growth% PBIT PBT PAT Growth% Cash Profit
1397.8 63.85 617.0 435.6
3775.000.9 3321.2 904.7
.11 (Rs.12 209.PERFORMANCE CHART
5.7 3220.5 232.1 810.06 824.4 50.3
4225.2 2372.0 1164.2 155.6 200703 12 1870.4 37.2 235.5 177.48 12 4213.3 34.000.7 320. The company’s gross sales for the half year ended 30 September stood at Rs 2783 crore and net profit for the same period was Rs 538 crore.1 88.5 11.000.7 151.69 200803 12 2844.4
2856.000. Y-o-Y Performance Description No.00 0. In crores) 200903 201003 12 3768.9 52. reported net profit of Rs 213 crore and gross sales of Rs 1374 crore for the second quarter of 2010-11.7 155.79 487. The company witnessed a growth of about 21% on a YoY basis in its topline while its bottom line grew by almost 42%.2 374.3 61.000.00 4.8 483.9 32.2 54.1 1560.7 100. of Months Net Sales Growth% 200603 12 1388.4 13.6 537.
09 23.48 12.9 812.7 130.06 10.95 13.0 665.5 789.9 6.86 25.4 674.67 19.6 694. Leadage acquisition to add value Exide has two smelter company as subsidiary including (1) Chloride metal and (2) Leadage Alloys.5 20.89 218.9 950.95 36.29 20.73 13. and (3) cost of making lead alloys.1 149.99 54.6 18.53 43.4 19.69 30.5 134.2 703.2 1152.63 48.63 49.39 11.89 12.2 13.51 39.73 30.96 49.54 31.5 17.42 30.13 43.96 27.59 23.87 48.89 50.48 12.7 21.2 11.51 42 37.17 209.25 15.3 18.2 881.21 19.7 903.42 2007 2008 2009 2010
SMELTER ADVANTAGE In-house smelting is helping Exide in reducing import and 3rd party purchase of lead within India.34 32.1 1030.8 694.29 134.31 19.1 20.6 5.07 48.(Rs.86 19.65 88. In crores) Quarterly Analysis Net Sales Total Expenditure PBIDT(Excl OI) PAT PBIDTM% (Excl OI) PBIDTM% PATM% 201009 201006 201003 200912 200909 200906 200903 200812 1127.74 21.6 11.98 114.9 17.
.61 21.19 11.73 217.7 888.5 212.4 245. Reduction in import as well as 3rd party purchase of lead helps Exide save on: (1) import duty of 5% (2) transportation cost.9 56.5 122.86 19.2 165.67
KEY RATIOS 2006 Performance Ratios Return on Equity Return on Capital employed EBITDA Margin PAT Growth Efficiency Ratios Receivable days Inventory days Payable days 21.77 33.5 799.85 13.99 247.58 13.09 61.49 263.1 68.3 912.1 11.
2. To cater to the increasing demand of battery the company had recently commissioned a new plant in Ahmednagar for manufacturing of motorcycle batteries and it has also started two new production lines for four-wheeler batteries in two of its plant. 3. PEER ANALYSIS
Exide industries EBITDA Margin Vs its peer Amara Raja batteries
25 20 15 10 5 0 2010 2009 2008 2007 2006 Exide Industries Amara Raja batteries
KEY RISKS 1.Total lead supplied by the in-house smelter to Exide (parent company) increased from 34% in FY09 to 43% in FY10. Increase in in-house contribution not only helped in expanding EBITDA margin of Exide from an average of 13% to 19% on a sustainable basis. which would lead to significant reduction in cost and improvement in margin. The company would do well in the future mainly on account of new capacity coming on stream and increased sourcing from its own smelters. We expect increased lead sourcing from in-house smelters to enable Exide to leverage its low cost structure which along with pricing power and capacity expansions going on stream would fuel growth. Slowdown in global and domestic auto demand. Higher than expected rise in lead prices Increased competition Environmental concerns
. 4. but has also helped expand margin relative to competitors like Amara Raja Batteries.
railways. Honda. has improved its operating margin to around 18% which is higher than its peers. This would further enhance the overall market base. power and other industrial applications. and also looking at making India their home for exports. Exide Industries Ltd. India is not only being looked at as a manufacturing base for export of passenger vehicles but also heavy vehicles including tractors. replacement demand for batteries has been robust as replacement cycle for batteries is typically around 4 years.FUTURE OUTLOOK India is emerging as a small car hub in the Asia-Pacific region with most of the major global players setting up their manufacturing bases in this country. according to Mr. In addition. Due to strong growth in automobile demand over the last 7 years. The unique strength of the company is its strong distribution network and its way ahead of it’s all other rivals in the industry. S. The domestic battery industry is poised to more than double within four years given the current rate of growth of over 20 per cent per annum. now.B. Exide industries is growing on the back of strong vehicle sales that improved its margins and enabled a double digit growth in sales and profits in 2010. But what is significant is that the industrial batteries consumption is going up with the economy booming.
. This will create opportunities for supply of batteries in the telecom towers. Based on the management strength. RECOMMENDATION: ACCUMULATE EXIDE INDUSTRIES LTD. railway usage and in the power sector. The growth of the Indian middle class. The existing automobile manufacturers are expanding their capacity and also setting up Greenfield projects. India. network distribution strength and positioning in the industry. The company is a leader in automotive battery segment. European and Japanese markets is attracting the global majors to invest in capacities in India and China. accounts for about 14 major automotive manufacturers. Backward Integration for inputs in the past few years. and all of them are growing rapidly in India. we expect the company to do very well and an investor investing in the company at this stage will definitely benefit. Hyundai and M&M. Chairman. which accounts for 80% of total operational cost. The company is the major supplier of batteries to almost all automobile companies like Tata Motors. The growth is coming from not just the automotive segment but significantly from the industrial sectors powered by usage in the telecom. availability of trained manpower at competitive costs and stagnation in the US. This will not only increase the market base for the domestic battery industry several fold but would also lead to strict conformity to global quality standards and processes. Ganguly.
as far as the battery industry is concerned. The information provided in the research documents is from publicly available data and other sources. Moreover.With the growth momentum picking up and the all round sense of buoyancy the future outlook. At current Market price of Rs. risk profile and financial position.163. which we believe.9. the high growth envisaged in telecom and power including setting up of nuclear power plants should lead to increased opportunities. we expect it to post an EPS of approx Rs. are reliable.
Disclaimer: The research reports provided is for the personal information for the authorized recipient and is not for public distribution and should not be reproduced or redistributed without prior permission. hence we can expect the stock at levels of Rs. Exide is expected to post sustainable earnings in future. looks promising. With the expectation of rise in demand for automobiles. Both auto and auto ancillary Industries are expected to register double digit growth year on year basis for the next five years.85 in FY11-12. both by public and private enterprises augur well for the Company's business. the stock trades at 21 times its TTM EPS.200-210 in a short-medium term.
CFS FINANCIAL SERVICES RESEARCH DESK
. Added to this. Based on the future earning estimates of the company. Efforts are made to try and ensure accuracy of data. Investors should not solely rely on the information contained in the research documents and must make investment decisions based on their own investment objectives. the huge expenditure proposed in the infrastructure sector.