Exide Industries Limited - Revenue growth moderates; Margins set to improve! - Antique

PAT at INR1.46bn (up 6% YoY; 41% QoQ) was marginally higher than our estimate of INR1.4bn (consensus INR1.35bn). Revenue growth tapered down to 6% YoY (5% QoQ) after several quarters of healthy revenue growth. Margins at 13.3% (down 92bps YoY/up 207bps QoQ) were marginally higher than our estimates of 13.1%. Lower other expenses - down 188bps QoQ as a % of sales (up 40bps YoY) more than made up for dismal gross margin improvement (up 27bps QoQ/down 12bps YoY). While the recent crack in lead prices (more so in the last 2 months) would improve gross margins going ahead, our fairly optimistic estimates seem to be captured in current valuations (core battery business at FY14/15 P/E at 14.8x/13.1x). Maintain HOLD with a target of INR145.

Current valuations capture our fairly optimistic forecasts... Maintain HOLD!

We model revenue growth picking up from the current 6%, to 15%/20% in FY14/FY15. Furthermore, we expect margins to improve from the current 13.3% to 15%/14.2% FY14/FY15 (we assume lower margins in FY15 on account of presumable deterioration in product mix, i.e. OEM segment increasing in share). Even then, core battery business trades at an FY14/15 P/E of 14.8x/13.1x, which isn't compelling enough for us to turn buyers. Maintain HOLD with a target price of INR145 (15x Sep '14e EPS + INR13 for the company's stake in ING).

Source : Equity Bulls

Keywords