MOSL: EXIDE (Buy)-Revenue beat; margin impacted by higher RM cost
EXIDE: Revenue beat; margin impacted by higher RM cost
(EXID IN, Mkt Cap USD2b, CMP INR179, TP INR215, 20% Upside, Buy)
Captive smelters dilute higher lead prices
- EXID’s topline performance was driven by growth in both Auto and Industrial segments in 1QFY22, while margin was restricted due to commodity cost inflation. We expect a cyclical recovery in demand from the OEM segment in FY22, along with strength in the Aftermarket segment, with a continuous shift from the unorganized to the organized segment.
- We largely maintain our earnings estimate. We maintain our Buy rating, with a TP of ~INR215/share (~14x FY23 EPS + INR25/share for the Insurance business).
Higher lead cost inflation hurt margin
- Revenue/EBITDA/PAT declined by 15%/37%/49% QoQ (+61%/+75.5%/+185% YoY) to INR24.9b/INR2.6b/INR1.25b in 1QFY22.
- Gross margin contracted by 280bp QoQ (+20bp YoY) to 31.5% (est. 34.5%) due to lead cost inflation.
- EBITDA margin fell 350bp QoQ (+90bp YoY) to 10.5% (est. 11.1%). This was due to operating deleverage and higher staff costs (up by 110bp QoQ to 7.4% as a percentage of sales). EBITDA declined by 37% QoQ (+75.5% YoY) to INR2.6b (est. INR2.2b).
- Adjusted PAT declined by 49% QoQ (+185%YoY) to ~INR1.25b (est. ~INR1b).
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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