Monday, November 16, 2009


We met the management of Exide Industries. Following are the key highlights: New opportunities offers visibility of ~15-18% growth till FY11E Exide expects the battery industry in India to more than double over the next five years. The company aims to grow at a faster rate than industry by eating into the market-share from the unorganized sector. The company has undertaken a host of new initiatives to gain market share. This includes:

Expansion of its existing sales network
Introduction of new products
Acquisition of two smelters to recycle lead from old batteries.

Exide could gain from stronger demand for inverters
We expect Exide to be a key beneficiary of stronger demand for inverters in near term due to rise in power deficit. Exide has over 40% share in the inverter market and derives about 15% of its total revenue from inverters at a higher margin.

Market Leader in OEM Segment
Exide Industries (EIL) is the largest player in the Indian auto battery industry with a market share of almost 77%.

EIL is also the biggest supplier to almost all OEMs in the Indian Auto Industry and thus the biggest beneficiary of the strong demand being witnessed by the auto majors in all segments.

The company supplies brands like EXIDE, SF, SONIC and Standard Furukawa in the domestic market. It exports brands like DYNEX, INDEX and SONIC.

Market Leader in Organised Battery Replacement Market
Around 50% of the battery replacement market is organised. In this market, EIL is yet again a market leader with 65% market share. With a higher margin in the replacement segment compared to margins earned in OEM segment, EIL continues to maintain higher margins compared to most of its peers.

Recommendation and Valuation
We have revised upwards our estimates driven by likely upside to volumes owing to strong demand in the auto sector and inverters and likely increase in market share owing to new products and sales network expansion.

Accordingly our EPS stands revised for FY11 from 7.4 to Rs8.0. The stock is currently trading at a P/E of 13.7xFY11E. We maintain accumulate on the stock.

To read the full report: EXIDE INDUSTRIES