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MOSL: EXIDE INDUSTRIES (Buy)-In-line operating performance-muted lead prices to continue aiding margins in 4Q

Exide Industries: In-line operating performance; muted lead prices to continue aiding margins in 4Q  

(EXID IN, Mkt Cap USD2.7b, CMP INR224, TP INR280, 25% Upside, Buy)

 

• Volume growth in automotive, UPS and solar drives revenues: Net sales grew by 9.6% YoY (-8.2% QoQ) to ~INR25b driven by growth in automotive, UPS and solar batteries. Average spot lead prices for 3QFY19 declined by 3.4% QoQ (-12% YoY) to INR142 per kg. In Jan'19, lead prices declined further by 0.4% (v/s 3QFY19).
• Operating performance in line, low other income impacts PAT: Gross margins expanded 200bp QoQ (+60bp YoY) to 35.1% (our est. 34%). On a YoY basis, the benefits of lower RM (-60bp YoY) and staff costs (-20bp) were offset by higher other expense (+60bp YoY/ +130bp QoQ) to 16.1% (our est. 15%). Consequently, EBITDA grew 10.6% YoY (-6.1% QoQ) to INR3.1b (in-line), resulting in EBITDA margins of 12.5% (in-line). Other income declined by 28% YoY (-31% QoQ) to INR80m (our est. INR110m), restricting adjusted PAT growth at just 0.5% YoY (-18.7% QoQ) to INR1.55b (our est. INR1.65b). For 9MFY19, revenue/EBITDA/PAT grew 18.5%/14.8%/9.8%.
• EXID is focusing on cost control initiatives and technology upgradation to improve profitability.