MOSL: EXIDE INDUSTRIES (Buy)-In-line-Muted topline, RM cost savings boost margins
EXIDE INDUSTRIES: In-line; Muted topline, RM cost savings boost margins
(EXID IN, Mkt Cap USD2.2b, CMP INR181, TP INR228, 26% Upside, Buy)
- Automotive segment's pain offset by Industrial segment growth: Net sales were flat YoY (+7% QoQ) to INR27.8b (v/s est. ~INR28.2b), driven by growth in UPS, Telecom and Infrastructure battery segments. However, Automotive batteries remained weak in 1QFY20. Also, weakness in lead prices (-18% YoY, -9% QoQ) restricted revenue growth due to pass-through mechanism. Currently, spot lead prices have inched up from 1QFY20 lows by ~4% to ~INR135/kg.
- Healthy operating performance drives margins: Gross margins improved +40bp QoQ (+190bp YoY) to 35.5% (v/s est. 35%); but it was diluted by higher other expense of -10bp QoQ (+130bp YoY) at 14.9% (v/s est. 14.4%). EBITDA grew 4% YoY (+9% QoQ) to INR4.08b (v/s est. INR4.1b), resulting in EBITDA margins expansion of 60bp YoY (+30bp QoQ) to 7% (v/s est. 14.5%). Other income came in higher at INR164m (v/s est. INR100m), aiding adjusted PAT growth at 7% YoY/QoQ to INR2.24b (v/s est. INR2.28b). The company is focusing on cost control and upgrading technology to improve the bottom line.
- Valuation and view: We have lowered our FY20/FY21 earnings estimates by 4%/5% to factor in the challenging OEM outlook as well as current lead prices. We factor in revenue/EBITDA /PAT CAGR of 7%/12%/11% for FY19-21E. The stock trades at 18.1x FY20E and 16.3x FY21 EPS. We are lowering our target P/E multiple by 10% to 18x (from 20x earlier) to factor in the risk of EVs for Exide's 2W/3W business (15-20% of revenues). Maintain Buy with a TP of INR228 (valuing core business at 18x Mar-21E EPS + Insurance business value of ~INR29/share).
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.