MOSL: EXIDE (Buy)-EBITDA margin above estimates-higher tax dents PAT
​EXIDE: EBITDA margin above estimates; higher tax dents PAT
(EXID IN, Mkt Cap USD2.9b, CMP INR217, TP INR269, 24% Upside, Buy)
- Volume growth in automotive segment, price hikes drive revenues: Net sales increased 4.6% YoY to INR21b (est. of INR21.9), driven by growth in auto OEM and replacement market (both 2Ws and 4Ws), and infrastructure batteries. Our channel check suggests that EXID has taken cumulative price increase of ~10-14% since Nov-16 in the replacement segment to offset lead price increase. Spot lead price declined 8.7% QoQ (+21% YoY) to INR139.1 per kg. In July, lead price was up by 18% YoY and by 5% v/s 1QFY18.
- EBITDA margin above est. led by lower other expenses: EBITDA margin contracted 20bp YoY (+235bp QoQ) to 15.4% (est. of 14.8%), largely due to a decline in other expenses. However, the increase in RM costs (due to lead inflation) by 50bp YoY (+20bp QoQ) and in staff cost by 40bp YoY (+20bp QoQ) restricted further margin expansion. Lower other income (-12% YoY, -48% QoQ) and higher tax rate of 32.4% (est. of 28%) led to PAT decline of 3.6% YoY to INR1.89b (est. of INR2.1b).
- Management indicated growth momentum in automotive and motorcycle batteries continues, while demand for home UPS battery remains subdued. However, growth in infrastructure batteries was good.
- EXID is focusing on cost control and technology upgradation to improve profitability.
Exide Industries is engaged in the design, manufacture and sale of automotive batteries, industrial batteries and submarine batteries. Co. supplies batteries to almost all the car and two-wheeler manufacturers in the country. Co. designs and manufactures its industrial batteries in a range from 2.5 Ah to 20,600 Ah in conventional flooded and Valve Regulated Lead Acid (VRLA) design. Industrial batteries are of three types, Conventional lead acid batteries, Valve regulated lead acid batteries and Nickel-Cadmium batteries. Co. manufactures high-end submarine batteries (Type 1, 2 & 3). Two to three submarine batteries are manufactured a year to meet the country's defence requirements.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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