INSUBCONTINENT EXCLUSIVE:
Geojit Financial Services has an accumulate call on Exide Industries with a target price of Rs 276.
The current market price of Exide
Industries is Rs 256.5.
Time period given by the brokerage is one year when Exide Industries price can reach the defined target
View of the brokerage on the company:
Revenue growth stablelead price shows resilience: Q2FY19 revenue grew by 15 per cent YoY driven by
growth in automobile, Home UPS and industrial batteries
EBITDA margin contracted by 30bps owing to currency depreciation and higher fuel cost
Reported PAT increased 98.1 per cent YoY to Rs 268 crore due to an exceptional income from the sale of a property
However, adjusted PAT was at Rs 191 crore, de-grew by 9.7 per cent
We expect the margin to show some resilience from Q3FY19 onwards due to softening lead price
On account of higher auto sales and early ramp-up of E- rickshaws we expect the revenue PAT to grow by 15 per cent/16 per cent CAGR over
FY18-20E.
Demand to remain robust for 2/3 wheeler vehicles: Automotive industry (PV, 2/3W) witnessed a growth of 10 per cent YoY in Q2FY19
We expect the demand scenario for 2W to remain robust for H2FY19 led by a normal monsoon, higher MSP and new product launches by OEMs
EIL will be the direct beneficiary from any structural change in the auto demand owing to its leadeRs hip position (nearly 60 per cent
market share) in the automotive battery
Notably, demand for the premium vehicle (>150cc) is grown by 16 per cent YoY.
Technology up-gradation strengthen aftermarket: We expect
margins to improve from current 13.5 per cent to 15.3 per cent over FY18-20E
Margin expansion is justifiable once 1) new technology up-gradation becomes fully operational 2) rebound in OEM CV segments 3)
concentration on more profitable segments 4) Strengthening distribution network by introducing sub-distributor led model (cluster of small
retailers ) and 5) stable lead price cost saving initiatives
Newer cost-effective brands like Boss/Dynex at a competitive price are expected to support market share gain from the unorganized
Over the last two months, the price started to soften by >11 per cent (from Rs 165/Kg in June 2018 to Rs 140/kg) which will benefit EIL in
We remain positive on the long-term outlook of EIL owing to higher acceptance of battery engineering
At CMP we value EIL at 20x (3yr historical average) FY20EPS and insurance business at 2x FY18 EV (Embedded value) Rs 51/share and revised
our target price to Rs 276 with Accumulate rating.
