>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

>AXIS BANK: 1QFY13 Results Update

Axis Bank’s 1QFY13 PAT grew 23% YoY to INR11.5b, in line with our estimate of INR11.2b. Lower than estimated opex growth compensated for the muted fee income growth. Key highlights:


 Daily average CASA ratio declined to 36% from 38% in FY12 and 37% in 1QFY12, led by continued moderation in average current account (CA) deposit growth. Daily average savings account (SA) growth (+22% YoY) remained healthy, with strong customer acquisitions (+26% YoY).
 Fee income growth continued to moderate (less than 10% YoY growth in the last two quarters). Fee income as a percentage of average assets declined 30bp QoQ, leading to RoA contraction of 24bp QoQ.
 Reported loan growth was strong at 30% YoY. However, loan growth was 25% YoY, adjusted for INR depreciation, and 21% YoY, adjusted for lower base (on account of repayment of short-term loans).
 Margin decline of ~18bp QoQ to 3.37%, slippages of INR4.6b, and addition of INR6.3b to restructured loans were largely on anticipated lines. However, muted recoveries and upgradations were disappointing.


Valuation and view: Axis Bank’s key strength has been its ability to grow CASA deposits (~35% CAGR over FY06-12). Given its strong and rapidly growing liability franchise, we expect SA growth to remain healthy (with strong customer acquisitions). While pressure on asset quality has increased, it still remains under check. Healthy NII and fee income growth coupled with stable cost to income ratio should lead to 19% and 15% CAGR in core operating profit and PAT over FY12-14. Maintain Buy.


To read report in detail: AXIS BANK

>Bajaj Finserv Ltd

WHAT’S CHANGED…
PRICE TARGET....................................................................................................Unchanged
RATING...............................................................................................................Unchanged


Income, profit both up 51% YoY…
Bajaj Finserv continued its strong profitability trend with consolidated PAT of | 195 crore surging 51% YoY for Q1FY12. Considering the slower quarter, the PBIT performance has been strong for both insurance businesses. Retail financing also delivered profit growth of 53% to | 139 crore. The windmill business also exhibited profitability strength growing 33% to | 17 crore at the PBT level. Consolidated return ratios remained strong with ~30% RoE.


We maintain our HOLD rating on the stock with SoTP target price of | 716, considering it is a direct play on the insurance sector and NBFC. All subsidiaries contributing to quarterly performance


Consolidated gross revenues increased 12% YoY to | 3252 crore while consolidated income from operations jumped 51% to | 927 crore. Due to a 12% dip in GWP from life insurance and strong 22% jump in general insurance GWP, revenue growth was slower while income was higher as PBT of life and general insurance remained strong in Q1FY13. The finance business has growth rapidly with AUM growth of 60% YoY to | 14485 crore while profit grew a strong | 139 crore. On a segmental basis, it contributed 50% of Q1FY13 consolidated PBT. Plans for fund raising by Q3FY13 of ~| 750 crore for Bajaj Finance and | 500 crore (vs. | 1000 crore approved) for Bajaj Finserv have been incorporated in estimates.

RISH TRADER