Exide Industries: Performance Highlights
Exide Industries: Performance Highlights
Exide Industries: Performance Highlights
Exide Industries
Performance Highlights
Y/E March (` cr) Net Sales EBITDA EBITDA Margin (%) Adj. PAT 2QFY13 1,521 188 12.4 120 2QFY12 1,173 90 7.7 51 % chg (yoy) 29.7 109.1 469bp 135.2 1QFY13 1,554 233 15.0 152 % chg (qoq) (2.1) (19.1) (261)bp (20.9)
NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Auto Ancillary 12,610 (76) 0.5 166/99 187,544 1 18,682 5,684 EXID.BO EXID@IN
`148 -
For 2QFY2013, Exide Industries (EXID) reported an extremely weak set of results on the bottom-line front (down 20.9% qoq) which was significantly below our estimates led by a sharp deterioration in the operating margins. The EBITDA margins were impacted on account of increase in cost pressures led by rising lead prices, employee expenses, power cost and advertising expenses. We have raised our top-line estimates for FY2013E/14E to factor in the strong volume momentum in the automotive replacement segment. Nonetheless, our earnings estimates are revised downwards to account for the cost pressures and increasing competitive activity in the segment which has led to reduced pricing power. We maintain our Neutral rating on the stock. Margin pressures impact 2QFY2013 performance: For 2QFY2013, EXIDs top-line surprised positively, registering a robust growth of 29.7% yoy (down 2.1% qoq) to `1,521cr, driven by a strong growth in the automotive replacement and inverter battery segments. The EBITDA margin contracted 261bp sequentially to 12.4% due to increase in raw-material expenses (led by INR depreciation) and higher other expenditure (due to higher power and fuel expenses). As a result, the net profit declined 20.9% qoq to `120cr against our estimate of `134cr. The management indicated that the replacement to original equipment manufacturer (OEM) mix improved on a sequential basis as growth in the OEM segment declined during the quarter. Outlook and valuation: We expect the company to report an improvement in its operating performance in 2HFY2013 led by a pick-up in demand from the OEM segment and sustained growth in the automotive replacement segment. Further, EXID has hiked battery prices by 5% across the replacement segment which will benefit the operating margins. Nonetheless, current valuations of 16.6x FY2014E earnings, capture most of the positives in our view. We therefore maintain our Neutral rating on the stock.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 46.0 26.1 18.0 9.9
3m 8.1 13.7
FY2011 4,547 19.9 633 17.8 19.4 7.4 18.9 4.6 25.5 30.5 2.5 12.7
FY2012 5,107 12.3 461 (27.1) 13.4 5.4 27.3 4.2 15.9 19.3 2.2 16.0
FY2013E 6,229 22.0 610 32.1 14.8 7.2 20.7 3.6 18.5 23.6 1.7 11.6
FY2014E 7,200 15.6 761 24.8 15.8 9.0 16.6 3.1 19.9 25.7 1.4 9.0
Yaresh Kothari
022-3935 7800 Ext: 6844 yareshb.kothari@angelbroking.com
2QFY13 1,521 1,000 65.7 90 5.9 7 0.5 236 15.5 1,333 188 12.4 1 28 13 172 172 11.3 51 30.0 120 120 7.9 85.0 1.4
2QFY12 1,173 832 71.0 64 5.5 2 0.2 184 15.7 1,083 90 7.7 1 25 8 72 72 6.1 21 28.8 51 51 4.4 85.0 0.6
% chg (yoy) 29.7 20.1 39.3 292.1 28.4 23.1 109.1 (32.4) 14.2 58.9 139.0 139.0 148.3 135.2 135.2 0.0 135.2
1QFY13 1,554 1,010 65.0 84 5.4 1 0.1 225 14.5 1,321 233 15.0 1 28 15 219 219 14.1 67 30.4 152 152 9.8 85.0 1.8
% chg (qoq) (2.1) (1.0) 6.7 428.4 4.9 0.9 (19.1) (27.9) 2.0 (14.9) (21.5) (21.5) (22.7) (20.9) (20.9)
1HFY13 3,075 2,010 65.4 174 5.7 9 0.3 462 15.0 2,654 421 13.7 2 56 27 390 390 12.7 118 30.2 272 272 8.9 85.0
1HFY12 2,421 1,626 67.2 136 5.6 2 0.1 344 14.2 2,108 313 12.9 3 48 39 300 300 12.4 86 28.6 214 214 8.9 85.0 2.5
% chg (yoy) 27.0 23.6 27.4 257.3 34.3 25.9 34.7 (18.5) 15.3 (29.5) 30.0 30.0 37.7 27.0 27.0 0.0 27.0
(20.9)
3.2
Top-line growth surprises positively: For 2QFY2013, the top-line registered a better-than-expected growth of 29.7% yoy (down 2.1% qoq) to `1,521cr driven by a strong growth in the automotive replacement and industrial battery segments. The growth in the inverter battery segment was mainly driven by the power shortage situation in the country. However, demand from the automotive OEMs remained subdued due to slowdown in the industry. The management indicated that the replacement to OEM mix improved on a sequential basis as growth in the OEM segment declined during the quarter.
18.6 15.0
21.2
19.0
16.0
8.3 4.0
1,173 1,250 1,448 1,554 1,521
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
Operating margin surprises negatively: During 2QFY2013, EXIDs EBITDA margin contracted 261bp sequentially to 12.4% against our expectation of 15.3% on account of increase in raw-material and other expenditure. While raw-material expenses as a percentage of sales jumped 110bp led by INR depreciation; other expenditure as a percentage of sales increased 100bp due to higher power and fuel expenses and increasing advertising spends. Employee cost as a percentage of sales also grew by 50bp qoq during the quarter. The company has increased the prices by 5% across the replacement battery segment from October 18, 2012 to offset the rise in input costs. We believe that the price hikes will enable the company to maintain its margins going ahead.
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
Mar-07
Dec-09
Apr-06
Nov-10
Feb-08
Oct-11
Sep-12
Net profit sharply lower-than-expected: The net profit registered a sharp decline of 20.9% to `120cr against our estimates of `134cr led by a lower-than-expected operating performance. However, on a low base of last year, the operating margins improved 469bp leading to a 135.2% growth in net profit.
2QFY13
7.7
Jan-09
2QFY13
(%) 16.0 14.0 12.0 7.9 10.0 8.0 6.0 4.0 2.0 0.0
9.8
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
3QFY12
4QFY12
1QFY13
2QFY13
Investment arguments
Demand scenario for auto and industrial batteries to remain positive in the long run: The auto and industrial battery segments have been witnessing strong growth post the economic downturn, driven by a robust demand-pull on account of higher auto and industrial production and increased consumer spending. As a result, we expect EXID to register strong revenue CAGRs of ~20% and ~17% in the auto and industrial battery segments, respectively. Market leader with a wider reach and pricing power: EXID is a dominant player in the auto battery (OEM and replacement) and industrial battery segments with a market share of 60-65% and 40-45%, respectively. EXID has leveraged upon its brand equity, better quality proposition and wider reach to consolidate its position in the market, which gives the company a superior pricing power compared to peers. Over the years, EXID has been able to improve its realization across the auto and industrial battery segments, which has more than offset the movements in input prices. We expect EXID to continue to leverage upon its market leadership position and pricing power, which would enhance the companys ability to pass on cost increases in the future as well. Captive sourcing reduces impact of lead price volatility: EXID acquired Tandon Metals (FY2008) and Leadage Alloys (51% in FY2009 and 49% in 2QFY2011) to recycle lead and lessen the vulnerability of rising lead prices. This reduced the company's dependence on imported lead in FY2011 to 28-30% (~32% in FY2010). Total lead supplied by the captive smelter increased to ~52% in FY2011 from ~50% in FY2010. EXID has benefitted from its captive sourcing strategy, as lead sourcing from captive smelters is 10-12% cheaper compared to market rates. Going forward, EXID plans to increase sourcing from its smelters to ~70% by FY2013E. Our sensitivity analysis suggests that for every 10% increase in sourcing from captive smelters, the companys EBITDA margin expands by ~50bp (assuming stable lead prices). Capacity expansion to increase volume growth: EXID has been operating at ~90% utilization levels over the past five years. Hence, the company is in the process of increasing its battery capacity to cater to the growing demand. As a result of increased capacity, we believe EXID is well placed to meet the rising auto battery demand. We estimate the companys overall utilization level to remain at 75-80% in FY2014E. Further, we expect EXID to post volume CAGRs of ~17% and ~14% in the auto and industrial battery segments, respectively, over FY2012-14E.
We expect the company to report an improvement in its operating performance in 2HFY2013 led by pick-up in demand from the OEM segment and sustained growth in the automotive replacement segment. Further, EXID has hiked battery prices by 5% across the replacement segment which will benefit the operating margins. Nevertheless, the current valuations of 16.6x FY2014E earnings capture most of the positives in our view. We therefore maintain our Neutral rating on the stock.
Dec-07
Dec-08
Dec-07
Mar-02
Mar-03
Mar-02
Nov-09
Nov-10
Mar-03
Dec-08
Jan-05
Jan-06
Jan-07
Jan-05
Jan-06
Apr-01
Apr-01
Jan-07
Nov-09
Nov-10
Oct-11
Oct-12
Oct-11
Feb-04
P/E (x) FY13E FY14E 15.0 10.7 15.0 25.4 20.7 16.4 18.7 6.5
^
EV/EBITDA (x) FY13E 8.8 5.6 7.4 16.2 11.6 10.0 7.7 4.4 FY14E 7.3 4.4 6.2 12.6 9.0 7.9 6.3 4.0 12.7 9.2 12.1 20.3 16.6 13.7 14.2 5.1
Feb-04
RoE (%) FY13E 28.9 21.2 19.9 19.4 18.5 22.7 22.9 9.8 FY14E 26.9 21.2 20.9 20.1 19.9 22.1 24.7 11.8
FY12-14E EPS CAGR (%) 22.2 6.2 19.3 13.3 28.4 12.0 56.2 6.4
Company background
Exide Industries (EXID) is a leading automobile and industrial battery manufacturer in India. The company commands a ~70% and ~65% market share in the OEM and organized replacement battery segment respectively and a 40-45% share in the industrial battery segment. EXID has technological tie-ups with majors such as Shin Kobe and Furukawa Battery. The automotive and industrial battery segments accounted for ~65% and ~35% of the company's total revenue in FY2012, respectively. EXID also has a 50% stake in ING Vysya Insurance Ltd, a JV with ING Group, Netherlands.
Oct-12
10
Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) (0.3) (0.7) 9.3 (0.6) (1.4) 60.1 (0.5) (1.6) 91.8 (0.5) (2.3) 78 (0.5) (2.1) 107 (0.6) (2.1) 135 2.9 54 26 46 28 2.9 50 23 42 26 3.1 59 25 46 35 3.1 65 27 52 40 3.3 62 27 51 34 3.4 62 26 52 32 31.7 54.9 25.1 40.8 81.1 31.0 30.5 55.4 25.5 19.3 37.5 15.9 23.6 47.5 18.5 25.7 53.5 19.9 14.1 0.7 3.9 36.0 10.1 36.0 21.4 0.7 4.0 57.4 4.4 57.4 17.5 0.7 3.7 45.6 45.6 11.5 0.7 3.4 27.9 27.9 13.0 0.7 3.8 34.7 14.1 0.7 4.0 39.5 3.6 3.5 4.4 0.6 15.2 6.3 6.3 7.3 1.0 25.8 7.8 7.4 8.4 1.5 31.9 5.4 5.4 6.6 1.5 35.7 7.2 7.2 8.5 1.5 41.1 9.0 9.0 10.3 1.5 48.3 41.7 33.7 9.7 0.4 3.6 22.3 7.6 23.5 20.4 5.8 0.7 3.0 12.7 4.8 18.9 17.6 4.6 1.0 2.5 12.7 3.9 27.3 22.4 4.2 1.0 2.2 16.0 3.4 20.7 17.4 3.6 1.0 1.7 11.6 2.9 16.6 14.4 3.1 1.0 1.4 9.0 2.4 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E
13.5 17,967.8
11
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Exide Industries No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
12