MOSL: EXIDE INDUSTRIES (Buy)-Above-estimate-healthy revenue growth drives profitability
Exide Industries: Above-estimate; healthy revenue growth drives profitability
(EXID IN, Mkt Cap USD3.0b, CMP INR224, TP INR268, 20% Upside, Buy)
- Volume growth in automotive, UPS, telecom and infra segments drives revenue: Net sales grew 32.7% YoY to INR22.8b (est. of INR19.9), driven by growth in automotive, UPS, telecom and infrastructure batteries. Our channel check suggests the company took cumulative price increase of ~3% during the quarter, which also aided revenue growth. Spot lead price increased 7.7% QoQ (+11.8% YoY) to INR161.2 per kg. In January 2018, lead price has increased 7.8% YoY (up 2% from 2QFY18).
- EBITDA margin at 10-quarter low due to significant lead inflation: EBITDA margin contracted 90bp YoY (-10bp QoQ) to 12.4% (est. of 12%), largely led by lead inflation and product mix impact (higher proportion of OE sales in automotive segment). Other income declined 70.4% YoY/20.3% QoQ to INR0.11b (est. of INR0.25b). Despite a 40% YoY decline in other income to INR0.1b (est. of INR0.25b) and higher depreciation of INR0.63b (est. of INR0.6b), PAT grew 1.8% YoY (-5.4% QoQ) to INR1.54b (est. of INR1.35b).
- Management indicated that growth momentum in automotive and motorcycle batteries was good, 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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