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Exide Industries
3QFY11 performance weak, 4Q outlook muted as well
Exide Industries posted a weak 3QFY11 performance – revenue
declined 6.8% qoq, EBITDA margin declined 700bps and profit
growth was a negative 26.9% qoq.
Subdued sequential sales growth and weak margin. Exide’s
3QFY11 sales rose only 15% yoy to `10.5bn, due to capacity
constraints in autos and weaker performance in the industrials
segment. EBITDA margin slid 800bps yoy to 14.7%. The company
says this was chiefly due to: i) higher OEM sales, diverting capacity
from the replacement segment; ii) lack of buoyancy in the industrials
segment; iii) high commodity prices – lead prices increased 18.4%
qoq and 4% yoy; and iv) cautiousness in passing on cost-push in the
replacement market.
Interest-cost reduction leads to smaller profit decline. Exide’s
adjusted profit declined 1.5% yoy to `1.2bn; this was lower than its
EBITDA decline owing to considerably low interest costs and
significantly higher other income.
4Q likely to be muted as well. Exide is expected to temper the rise
in lead prices by increased in-house sourcing of raw-materials from its
own lead smelters. Commissioning of capacities for the auto segment
in Apr ’11 would help cope with replacement demand, which is not
being adequately serviced currently. However, in 4Q, weaker demand
from the industrial segment and continued capacity constraints on
the auto segment are likely to temper sales growth and profitability.
Valuation and risks. At current market price of `138, Exide trades
at FY11e PE of 19.4x. We have a Hold on the stock. Risks: recovery
in industrial demand and lower lead prices.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Exide Industries
3QFY11 performance weak, 4Q outlook muted as well
Exide Industries posted a weak 3QFY11 performance – revenue
declined 6.8% qoq, EBITDA margin declined 700bps and profit
growth was a negative 26.9% qoq.
Subdued sequential sales growth and weak margin. Exide’s
3QFY11 sales rose only 15% yoy to `10.5bn, due to capacity
constraints in autos and weaker performance in the industrials
segment. EBITDA margin slid 800bps yoy to 14.7%. The company
says this was chiefly due to: i) higher OEM sales, diverting capacity
from the replacement segment; ii) lack of buoyancy in the industrials
segment; iii) high commodity prices – lead prices increased 18.4%
qoq and 4% yoy; and iv) cautiousness in passing on cost-push in the
replacement market.
Interest-cost reduction leads to smaller profit decline. Exide’s
adjusted profit declined 1.5% yoy to `1.2bn; this was lower than its
EBITDA decline owing to considerably low interest costs and
significantly higher other income.
4Q likely to be muted as well. Exide is expected to temper the rise
in lead prices by increased in-house sourcing of raw-materials from its
own lead smelters. Commissioning of capacities for the auto segment
in Apr ’11 would help cope with replacement demand, which is not
being adequately serviced currently. However, in 4Q, weaker demand
from the industrial segment and continued capacity constraints on
the auto segment are likely to temper sales growth and profitability.
Valuation and risks. At current market price of `138, Exide trades
at FY11e PE of 19.4x. We have a Hold on the stock. Risks: recovery
in industrial demand and lower lead prices.
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