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• Exide benefits from structural growth in the automobile segment:
With rising automobile sales in India (sales of passenger cars at 2.2m
have doubled over the past four years; we expect growth to be sustained
at c.13-15% over FY11-13), the high-margin replacement market is
likely to drive sales for the industry. Exide is India’s largest
manufacturer of lead acid batteries, with a market share of over 70% in
the automotive segment, and hence would be a key beneficiary of this
growth. Further, demand for industrial batteries is likely to be driven by
the power back-up segment, given sustained power deficiencies and the
increasing usage of information-technology-related services in India.
• Capacity expansion to meet growing demand: In order to meet the
rising demand, management is expanding capacity for its two-wheeler
segment by over 100% to 21 million units and the four-wheeler segment
by 50% to 12 million units over FY10-12.
• Captive smelters to enable raw-material-related savings: Exide’s
smelter facilities give the company access to recycled lead, which is
typically 5-10% cheaper than LME prices; furthermore, it helps reduce
dependence on imported lead and decreases the availability of exhausted
batteries to the unorganized sector. Management indicated that the
company will be able to meet as much as 70% of its requirements from
its captive facilities over the next few years (up from 55% currently).
• Valuation: The stock currently trades at 16.7x on FY12E and 14x on
FY13E consensus earnings, implying an earnings CAGR of 19% over
FY10-13E. The business has been able to generate an ROE of over 20%.
Key challenges for the company include rising competitive intensity and
volatility in lead prices
Investments
Exide generates significant free cash, which it has deployed in acquiring trade assets
(lead smelters) and in financial investments (stake in ING) .
Lead Smelters: In November 2007, Exide acquired a 100% stake in the Pune-based
smelter, Tandon Metals Limited, which has since been renamed to Chloride Metals
Limited. It also acquired a 51% stake in the Bangalore-based smelter, Leadage
Alloys India Limited in April 2008. In 2010, it bought out the remainder stake and
now is a fully owned subsidiary. Together, these two subsidiary smelters meet c.55%
of the companies lead raw material requirements. The company has invested
Rs250MM in Cholride Metals and Rs334MM in Leadage Alloys as of Mar’10.
ING Vysya Life: Exide acquired a 50% stake in ING Vysya Life Insurance Company
(IVL) Limited in Oct05 as a financial investment. The cumulative investment in the
company stands at Rs.6.2B (as of FY10). IVL is 26% owned by the Netherlandbased
ING Group, which currently runs the operation (while Exide is a financial
investor).
Company Background
Exide is India’s largest manufacturer of lead acid storage batteries. The Company
manufactures a wide range of storage batteries ranging from 2.5 Ah to 15,000 Ah
capacity, covering a broad spectrum of applications. It derives over 60% of its
turnover from the automobile segment and the balance from the industrial segment.
Given Exide’s historical presence in India (established in 1947), economies of scale
and widespread distribution network, the company is the market leader across
product segments. The company has a dominant market share of over 70% in the
automotive segment. Within the automotive segment, it derives c.3/4 of its sales from
the high-margin aftermarket segment and the remainder from the OEM segment. In
the industrial segment, the company faces competition from Amara Raja, and in the
telecom and power back up segments from HBL.
Exide has a technical collaboration with Shin-Kobe Electric Machinery Company
Limited, Japan (part of Hitachi Group) for automotive batteries and also for valve
regulated lead acid storage batteries. It also has a technical collaboration with The
Furukawa Battery Company Limited, Japan for automotive batteries. In addition, the
cmpany has a standalone Research and Development Centre recognized by the
Department of Science and Technology, Government of India.
Shareholding pattern
Exide’s predecessor began its operations in 1916 as an import house of the UK-based
Chloride Electrical Storage Company; subsequently it was incorporated as a
company, Associated Battery Makers (Eastern Ltd) in 1947. The company has since
changed its identity over the years and has been operating since 1995 as Exide
Industries Ltd since its takeover by the Rajen Raheja group
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• Exide benefits from structural growth in the automobile segment:
With rising automobile sales in India (sales of passenger cars at 2.2m
have doubled over the past four years; we expect growth to be sustained
at c.13-15% over FY11-13), the high-margin replacement market is
likely to drive sales for the industry. Exide is India’s largest
manufacturer of lead acid batteries, with a market share of over 70% in
the automotive segment, and hence would be a key beneficiary of this
growth. Further, demand for industrial batteries is likely to be driven by
the power back-up segment, given sustained power deficiencies and the
increasing usage of information-technology-related services in India.
• Capacity expansion to meet growing demand: In order to meet the
rising demand, management is expanding capacity for its two-wheeler
segment by over 100% to 21 million units and the four-wheeler segment
by 50% to 12 million units over FY10-12.
• Captive smelters to enable raw-material-related savings: Exide’s
smelter facilities give the company access to recycled lead, which is
typically 5-10% cheaper than LME prices; furthermore, it helps reduce
dependence on imported lead and decreases the availability of exhausted
batteries to the unorganized sector. Management indicated that the
company will be able to meet as much as 70% of its requirements from
its captive facilities over the next few years (up from 55% currently).
• Valuation: The stock currently trades at 16.7x on FY12E and 14x on
FY13E consensus earnings, implying an earnings CAGR of 19% over
FY10-13E. The business has been able to generate an ROE of over 20%.
Key challenges for the company include rising competitive intensity and
volatility in lead prices
Investments
Exide generates significant free cash, which it has deployed in acquiring trade assets
(lead smelters) and in financial investments (stake in ING) .
Lead Smelters: In November 2007, Exide acquired a 100% stake in the Pune-based
smelter, Tandon Metals Limited, which has since been renamed to Chloride Metals
Limited. It also acquired a 51% stake in the Bangalore-based smelter, Leadage
Alloys India Limited in April 2008. In 2010, it bought out the remainder stake and
now is a fully owned subsidiary. Together, these two subsidiary smelters meet c.55%
of the companies lead raw material requirements. The company has invested
Rs250MM in Cholride Metals and Rs334MM in Leadage Alloys as of Mar’10.
ING Vysya Life: Exide acquired a 50% stake in ING Vysya Life Insurance Company
(IVL) Limited in Oct05 as a financial investment. The cumulative investment in the
company stands at Rs.6.2B (as of FY10). IVL is 26% owned by the Netherlandbased
ING Group, which currently runs the operation (while Exide is a financial
investor).
Company Background
Exide is India’s largest manufacturer of lead acid storage batteries. The Company
manufactures a wide range of storage batteries ranging from 2.5 Ah to 15,000 Ah
capacity, covering a broad spectrum of applications. It derives over 60% of its
turnover from the automobile segment and the balance from the industrial segment.
Given Exide’s historical presence in India (established in 1947), economies of scale
and widespread distribution network, the company is the market leader across
product segments. The company has a dominant market share of over 70% in the
automotive segment. Within the automotive segment, it derives c.3/4 of its sales from
the high-margin aftermarket segment and the remainder from the OEM segment. In
the industrial segment, the company faces competition from Amara Raja, and in the
telecom and power back up segments from HBL.
Exide has a technical collaboration with Shin-Kobe Electric Machinery Company
Limited, Japan (part of Hitachi Group) for automotive batteries and also for valve
regulated lead acid storage batteries. It also has a technical collaboration with The
Furukawa Battery Company Limited, Japan for automotive batteries. In addition, the
cmpany has a standalone Research and Development Centre recognized by the
Department of Science and Technology, Government of India.
Shareholding pattern
Exide’s predecessor began its operations in 1916 as an import house of the UK-based
Chloride Electrical Storage Company; subsequently it was incorporated as a
company, Associated Battery Makers (Eastern Ltd) in 1947. The company has since
changed its identity over the years and has been operating since 1995 as Exide
Industries Ltd since its takeover by the Rajen Raheja group
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