Exide Industries - 4QFY2012 Result update - Angel Broking

Exide Industries (EXID) reported better-than-expected results for 4QFY2012, driven by strong volume growth in the two-wheeler and industrial battery segments. We broadly retain our volume and top-line estimates for FY2013E/14E as we believe improvement in auto OEM sales and pick-up in the auto replacement battery segment going ahead will be the key positives for the company. We have, however, revised our margin estimates for FY2013E downwards to factor in the recent price cuts (blended price cut of 2% in the automotive segment) announced by the company to counter competitive pressures mainly from Amara Raja Batteries. Due to the recent correction in the stock price (down ~15% over the past one month), EXID is trading at attractive valuations of 13.8x FY2014E earnings. We recommend Buy on the stock.

Better-than-expected operating performance: For 4QFY2012, EXID reported strong 16% yoy (15.8% qoq) top-line growth to Rs.1,448cr, driven by strong growth in the two-wheeler (~28% yoy) and industrial battery volumes (~15% yoy). Growth in the industrial battery segment was led by ~22% and ~14% yoy growth in inverter and UPS battery volumes, respectively. Four-wheeler battery volumes continued to remain subdued as total sales witnessed modest ~7% yoy growth. As a result, replacement/OEM volume mix for the four-wheeler battery segment was 1.22x vs. 1.24x in 3QFY2012. EBITDA margin improved by 147bp sequentially to 14.7%, as the industrial battery segment's EBITDA margin improved by 390bp qoq to 15%, led by superior product mix. However, the automotive battery segment's margins declined by 150bp qoq on account of lower realization from OEMs. Net profit for the quarter stood at Rs.143cr, a jump of 36.6% qoq; however, it declined by 12.9% yoy, led by 403bp contraction in operating margin.

Outlook and valuation: At Rs.124, EXID is attractively valued at 13.8x FY2014E earnings and, therefore, we recommend Buy on the stock with an SOTP target price of Rs.146. Considering increased competitive intensity in the sector (leading to limited pricing power), we value EXID's core operations in-line with its historical average of 15x its FY2014E EPS at Rs.134/share instead of 16x earlier. We value its stake in ING Vysya Life Insurance at Rs.12/share on FY2014E NBAP.

Source : Equity Bulls

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