MOSL: EXIDE INDUSTRIES (Buy)-EBITDA margin below estimate-lead inflation, mix dent performance
​Exide Industries: EBITDA margin below estimate; lead inflation, mix dent performance
(EXID IN, Mkt Cap USD2.9b, CMP INR209, TP INR254, 22% Upside, Buy)
- Volume growth in Automotive, UPS, Telecom and Infra drives revenue: Net sales increased 23.2% YoY to INR23.7b (est. of INRb21.7), driven by growth in Auto OEM and replacement market (both 2Ws and 4Ws), UPS, Telecom and Infrastructure batteries. Our channel check suggests that the company has taken a cumulative price increase of ~1-2% during the quarter, which also aided growth. Spot lead price rose 7.6% QoQ (+19% YoY) to INR149.6 per kg. In October, lead price grew 21% YoY, and 9.5% v/s 1QFY18.
- EBITDA margin at nine-quarter low led by inflation and mix impact: EBITDA margin contracted 250bp YoY (-290bp QoQ) to 12.5% (est. of 15.1%), largely led by lead inflation and product mix impact (higher proportion of OE sales in Automotive). However, the decline in staff cost and other expenses by 60bp YoY and 260bp YoY, respectively, restricted further margin contraction. EXID reported an exceptional item of INR0.4b toward the settlement of the trademark-related dispute with Exide Technologies, USA. Lower other income (-40% YoY, +5% QoQ) and weak operating performance led to a 10.3% YoY decline in adjusted PAT to INR1.6b (est. of INR2.0b).
- Management indicated that growth momentum in Automotive and Motorcycle batteries was healthy, while demand for Telecom, UPS and Other infrastructure segments was also good. EXID is focusing on cost-control initiatives 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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