>EXIDE INDUSTRIES LIMITED

WHAT’S CHANGED…
PRICE TARGET....................................................................................................Unchanged
EPS (FY13E)............................................................................. Changed from | 7.3 to | 7.7
EPS (FY14E)............................................................................. Changed from | 9.4 to | 9.5
RATING....................................................................................... Changed from Hold to Buy


Revenue growth a positive surprise…
Exide Industries’ (EIL) Q1FY13 results were far ahead of estimates on topline led by strong industrial and two-wheeler volumes. EBIDTA margin (excluding forex loss) came above our expectations. We have modified our revenue estimates considering the better than expected industrial/two-wheeler replacement growth. We expect the recent lead price fall to stabilise at ~$1.9/kg & | depreciation to get arrested in medium term thereby aiding margin expansion. It seems the right time to upgrade multiple for EIL as the underperformance (since last six quarters) is near its end with performance improving as in line with earlier
management commentary. We maintain BUY with upgraded TP of | 149.


Handsome volume growth; higher margins
EIL’s revenue surged ~25% YoY to | 1551 crore (up ~7.3% QoQ) driven by volume growth in the automotive replacement and industrial battery segments. The two-wheeler battery segment grew at 28% YoY in Q1FY13 to register ~3.9 million units on the back of strong replacement sales. In the four-wheeler segment, sales grew modestly at ~10% YoY at ~2.4 million units. Industrial sales remained strong with 19% growth. EBITDA margins, thus, came in at 15.6% (excluding forex loss of | 10.3 crore), which is ~100 bps higher QoQ) but lower than its historical average of ~18%. EIL declared PAT of | 152 crore (higher by 6.6% QoQ).


Automotive replacement, industrial drivers to lead growth
The industrial battery segment, which now contributes ~45% of total revenue, is expected to grow at 15-16% in FY13-14E. Home UPS segment is expected to record robust numbers in FY13E. We have emphasised for long about a strong two-wheeler replacement cycle expected to kick in FY13E that seems to have set in. We believe automotive growth would be replacement driven. EIL had announced a price hike of 2.5% in June for automotive batteries and is expected to hold prices in the near term alleviating any concerns on price wars in short term.


Re-rating in-sight as “battery king”
EIL has started gaining back lost market share in the replacement market. We believe the margin profile is improving, thereby leading to higher RoEs leading to our multiple upgrade. We value the stock on an SOTP basis with core business at | 133, valuing other subsidiaries/investments at | 16/share to arrive at a TP of | 149. Maintain BUY.


To read report in detail: EIL